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Do Colleges take into account the value of your house/mortgage in their financial aid

speechie92speechie92 Posts: 136Registered User Junior Member
Because if not, couldn't you theoretically just dump all of your assets into paying off you home?
Post edited by speechie92 on

Replies to: Do Colleges take into account the value of your house/mortgage in their financial aid

  • samiamysamiamy Posts: 1,681Registered User Senior Member
    FASA schools no, profile schools yes they take your home value as a vehicle to borrow against if you have alot of equity(paid off) in it.
  • swimcatsmomswimcatsmom Posts: 14,999Registered User Senior Member
    FAFSA does not take into account the primary home and specifies that it is not reported as an asset. Profile does ask for the information but profile schools vary as to how they use it.

    For FAFSA income has more of impact than assets unless the assets are fairly large. Retirement accounts and the primary home are not reported on FAFSA and then there is a certain amount of asset protection based on the number of parents and the age of the older parent. After that @ 5.6% of parent assets go to the EFC. Students have no asset protection and 20% of assets go to the EFC.
  • scottaascottaa Posts: 1,037Registered User Senior Member
    >>Because if not, couldn't you theoretically just dump all of your assets into paying off you home?<<

    In some instances, that makes good sense.
  • 'rentof2'rentof2 Posts: 4,327Registered User Senior Member
    The CSS Profile will ask you how much your house is currently worth, how much you paid for it, when you purchased it, how much you still owe on it, and how much your monthly mortgage payment is.

    As swimcatsmom said, how individual schools use that information varies. As to paying it off, you could do that, but then they will also know the home is 100% equity and that you have no continuing payment obligation that you must shell out month to month. It depends on your other finances and how the individual school treats such information.

    I think in our case (modest income, no assets besides our home) it might be better not to pay it off even if we were able to ... which of course we're not since we have a modest income and no other assets. ;)
  • sk8rmomsk8rmom Posts: 5,746Registered User Senior Member
    couldn't you theoretically just dump all of your assets into paying off you home?

    In theory, yes. But, in many cases, the risk of doing that would outweigh the benefit and each family must look at the whole picture. For FAFSA, both the primary home and retirement assets are excluded and there is a parent asset protection allowance based on the age of the older parent. Above that, parent assets are added to EFC at a rate of 12% of net worth after exclusions.

    The FAFSA EFC is not indicative of the cost most families will actually pay for college. Since many colleges do not meet the need of the student/family, having all available assets tied up in an illiquid asset such as home equity would mean taking out a higher interest loan when the tuition bill comes due. Unless one has/can obtain a home equity loan, but that defeats the purpose if the asset was available to begin with.

    More info on how the EFC is calculated, and the exclusion tables, can be found here:
    http://www.ifap.ed.gov/efcformulaguide/attachments/111408EFCFormulaGuide0910.pdf
  • thumper1thumper1 Posts: 37,023Registered User Senior Member
    parent assets are added to EFC at a rate of 12% of net worth after exclusions.

    Has this changed recently from the 5.6% it was last year?
  • swimcatsmomswimcatsmom Posts: 14,999Registered User Senior Member
    parent assets are added to EFC at a rate of 12% of net worth after exclusions
    It actually works out @5.6%. While 12% of the asset value is added to the AI (available income) giving the AAI (adjusted available income), the EFC is calculated by taking a % of the AAI based on table A6. The maximum % in table A6 is 47% giving a maximum that assets will affect the EFC of 5.6%. (47% of 12% = 5.64%). In reality a little less as the first $28k of the AAI contributes @ 27% to the EFC with the 47% kicking in after that. But that would give a very variable amount so 5.64% is a simpler explanation.
  • sk8rmomsk8rmom Posts: 5,746Registered User Senior Member
    My bad, should have said the EFC calculation instead...good catch SCM and thumper!
  • hmom5hmom5 Posts: 10,882- Senior Member
    I sure wouldn't want all of my assets in my home in this environment. Lenders are being very conservative about home equity loans, prices are still going down in some markets--you could easily be in trouble if you need to tap the equity.
  • anxiousmomanxiousmom Posts: 5,301Registered User Senior Member
    Just to restate - some Profile schools either cap how much equity they consider from your home or don't consider it at all. :) Other Profile schools take the whole home equity into consideration. :( Glad my DS is at a "cap" / don't consider school ! :)
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