right arrow
PARENTS4PARENTS is a new initiative aimed at highlighting the vast expertise of our parents community while helping other parents better navigate the college admissions process. aggies1989 is a UC alumnus and parent of two UC college kids. ASK HIM ANYTHING!
GUEST STUDENT OF THE WEEK: fintech3753 is a current student at the Wharton School. Majoring in finance, he is hoping to pursue a career at the intersection of finance and technology. ASK HIM ANYTHING!
Make sure to check out our August Checklist for HS Seniors. Consult these quick resources to get you started on the process this month.
As we work to adjust to the current reality, make sure to check out these dedicated COVID-19 resources: our directory of virtual campus tours, our directory of extended deadlines, as well as the list of schools going test optional this fall.

Financial Aid not provided despite demonstrated need

BigrobBigrob 14 replies1 threads Junior Member
I completed FAFSA and CSS profile; the FAFSA calculation was an EFC of around $800. Upon revision this amount later was calculated as $0. However, my college says because my parents had to use a portion of their home equity via HELOC to meet basic living expenses in 2018, that I was disqualified from receiving aid because the entire amount of the HELOC was considered additional untaxed income. Now I am unable to attend college! I don't know what to do. Please help, do I have any legal recourse? The college states they meet 100% of demonstrated financial need, but they clearly don't.
51 replies
· Reply · Share
«13

Replies to: Financial Aid not provided despite demonstrated need

  • Groundwork2022Groundwork2022 3526 replies81 threads Senior Member
    @kelsmom may have some wisdom to share.

    When colleges say they meet 100% of demonstrated need, they mean need as they calculate it, not as your family feels they need. In addition, colleges have different policies as to whether they consider home equity a factor in need calculations.

    So, no, you do not have legal recourse.

    Have you already asked for an appeal, though? I would think that your parents would have had to take out an enormous amount of home equity in a HELOC for the college to go from giving you a full ride (or nearly so) down to giving you nothing.
    · Reply · Share
  • BelknapPointBelknapPoint 4985 replies19 threads Senior Member
    First, with a FAFSA EFC of $0, you would be eligible for the full Pell Grant of $6,345 for the next academic year, as well as federal direct loans with the highest possible amount subsidized, so you are qualified to receive financial aid.

    I find it hard to understand how, with a FAFSA EFC of $0, a school that claims to meet 100% of demonstrated need offers nothing in institutional aid. When you completed FAFSA and Profile, how much of the HELOC funds were still available to be reported as a parent asset? What other asset amounts did your parents report, and what was their reportable 2018 income? What college is this?
    · Reply · Share
  • BigrobBigrob 14 replies1 threads Junior Member
    An appeal has been filed. I feel so foolish, had I known that colleges had the option of not meeting 100% demonstrated need even though they say they will I would not have committed early decision. Thank you for taking the time to reply. I'm disappointed because I had my heart set on attending college in the fall and now I won't be able to.
    · Reply · Share
  • BigrobBigrob 14 replies1 threads Junior Member
    Thank you for your interest. No funds remained, there is no HELOC "asset", just the additional debt burden of the HELOC on top of the mortgage. There were no parental assets, and the reportable 2018 income was approximately $10K. It's a public college in Virginia.
    · Reply · Share
  • TomSrOfBostonTomSrOfBoston 15908 replies1063 threads Senior Member
    Did you seek advice from anyone about financial aid? Did you run the Net Price Calculator for that school? A college that meets 100% need, as said above, it is the need that they calculate. And for a CSS college the FAFSA EFC is totally irrelevant.
    · Reply · Share
  • kelsmomkelsmom 16165 replies99 threads Senior Member
    Were you awarded a Pell grant? If not, something is very wrong.

    I honestly don’t understand why the HELOC is affecting anything, unless the funds were reported on the financial aid documents as assets on the day of filing (in which case, if they were subsequently used for the intended purpose, a professional judgment decision may very well allow that money to be ignored). But if, as you seem to indicate, the funds from the HELOC were not in the bank/reported as assets, I don’t know why the money was added as income. It is NOT income ... it is a loan taken out that must be repaid.

    I would definitely push back on this.
    · Reply · Share
  • thumper1thumper1 78510 replies3537 threads Senior Member
    I’m very confused by your post. How much in HELOC funds did your parents use in 2018 (if they were indeed counted as income....2018 income is what was on the 2020-2021 FAFSA).

    How much in HELOC funds were in your parent bank account on the date you filed your 2020-2021 FAFSA.

    The only public college that guarantees to meet full need for all accepted students in VA is University of Virginia...so if that is not the college, you misunderstood something. The school also uses the CSS Profile. Your FAFSA EFC would have made you eligible for the full Pell Grant. Did you get that?

    Are you instate for VA, or OOS? I only ask because the cost for OOS is significantly higher than for instate (even though the school meets full need).

    Any chance your parents own a business or are self employed? Do they own real estate in addition to your primary residence?

    When did you find out about this financial aid issue? You should have received your financial aid package with your acceptance which would have been much earlier this year than now.

    Are you a transfer student?
    · Reply · Share
  • BigrobBigrob 14 replies1 threads Junior Member
    Lots of good questions. I will say yes this public college guarantees to meet full need. The only grant received is the Pell grant which covers only a small fraction of the costs (in this case, about 15%). I am in state. My parents own rental properties that lose money every year. The financial aid offer was made on July 9th, it was not coincident with my acceptance to the school. I am not a transfer student. The HELOC was not listed as an asset (nor should it be, since even I know it is a liability).
    · Reply · Share
  • austinmshauriaustinmshauri 10036 replies389 threads Senior Member
    My parents own rental properties that lose money every year.

    I suspect this is your problem. How much equity do your parents have in these properties? I think that's counted as an asset on the profile.
    · Reply · Share
  • Eeyore123Eeyore123 2089 replies25 threads Senior Member
    I believe the error is your error. You must have reported the loan proceeds as untaxed income. It is not income. Try to setup a meeting with them to discuss. I don’t understand how you are an ED applicant and this is first an issue now.
    · Reply · Share
  • twoinanddonetwoinanddone 25011 replies20 threads Senior Member
    HELOC is never income, as it is a loan. It could be an asset if the proceeds were in the bank on the date of filing.

    Are you sure it wasn't a withdrawal from an IRA or 401k? Then it could all be income and a big hit.

    The rental houses are an asset and may have a lot of value even if they lose a lot of money every year. That could throw your assets off for FAFSA.
    · Reply · Share
  • BigrobBigrob 14 replies1 threads Junior Member
    Hi, thank you for assuming it is my error. I did not report loan proceeds as untaxed income. The rental properties have negative equity - they are worth less than the amount owed on them. They can't be sold as that would requiring coming up with money out of pocket that my parents don't have. They are trying to do a deed in lieu (?) but have not been able to get rid of them yet. The only thing showing was the federal money, not the institutional money, and until July 9th that amount was shown as "preliminary". I assumed it would be updated to include institutional grants but when the offer letter came out on July 9th, there was no funding from the institution to support the 100% demonstrated need. There was no withdrawal from an IRA or 401K.
    · Reply · Share
  • thumper1thumper1 78510 replies3537 threads Senior Member
    Are you a transfer student? Or did you get accepted off the waitlist?

    If not, why are you only asking this now? Why did you get your financial aid on July 9 instead of before May 1.

    Even with negative equity, there was rental income, right? Did you list that as income too.

    Did your parents run the rental properties as a business? Were there business deductions taken?

    Did you use the IRS Data Retrieval Tool? Is there any chance your parents did a rollover of a tax deferred retirement account in 2018? Ask them.
    · Reply · Share
  • cptofthehousecptofthehouse 30510 replies59 threads Senior Member
    The HELOC would not be treated as income. If any of the proceeds were sitting in an account, that amount would be included as parental assets.

    I suspect the rental property is the issue. If your parents are in the business of renting out property, that property is likely to be assigned a value based on income received. Any depreciation and expenses might be added back into the equation. I’ve known a number of families who rent out properties for a living, and they all were hit hard by PROFILE. That is a business according to the colleges and they assess the income and assets very differently from the IRS and FAFSA.

    How much income did those properties generate in 2018 before expenses and depreciation were taken out? Was the HELOC taken out in 2018?

    The fact of the matter is that every college can assess what need is for institutional money however they please. You should understand how this school is assessing your family financials. They are not using FaFSA methodology.
    · Reply · Share
  • politepersonpoliteperson 653 replies4 threads Member
    I suspect you might not have a clear understanding of how your parents are structuring the rentals, as well as theIr overall financial picture. They are operating rentals that are underwater, and losing money every month, with only 10k in what you call “reportable income”. But they were able to cover those mortgages and also secure a HELOC large enough to supposedly zero out all institutional aid? Even if the HELOC were the issue, which seems unlikely, that math doesn’t work.

    Without a more complete explanation, that sounds to me like a situation in which the college is recognizing either asset value out of line from what you’ve described, or significant cash flow that isn’t being taxed due to deductions and depreciation. As mentioned, the favorable treatment given to rental income by the IRS when structured in particular ways isn’t copied by FA offices. Seems unlikely the HELOC is the issue, although I can imagine business scenarios where it could be viewed that way.

    Anyway, I’d definitely pursue the appeal, but I’d sit down with the parents to make sure you truly understand the big picture. Good luck!
    · Reply · Share
  • BigrobBigrob 14 replies1 threads Junior Member
    I appreciate the time folks are taking to respond to my inquiry. Most responses seem to start from the premise that I've done something wrong or don't understand something. At the risk of sounding arrogant, that's not really the case, and it's unfortunate that people are starting with that perspective.

    The losses on the rental properties are not simply "paper losses" for IRS purposes. The expenses on these properties exceed the rental income without factoring in any depreciation. They are not isolated as a separate "business".

    I answered what the reportable income for 2018 was because that's what was asked. As I said, I didn't report the HELOC as "income". It was classified as such by the FA Office, and the FA Office told me that was the reason my financial aid was declined.

    Hopefully this clears up any speculation. Summing up: the FA Office stated that they considered the HELOC as "untaxed income" since my parents needed it to meet expenses in 2018. My understanding is the amount used was $10K. So given that, what do people now think would be the reason I would be considered ineligible for institutional financial aid?
    · Reply · Share
  • vpa2019vpa2019 703 replies19 threads Member
    Speculation is fine but it seems the only way to receive the actual explanation is to speak with the FA office. The lack of financial aid indicates they assessed your family’s finances differently than you do.
    · Reply · Share
  • politepersonpoliteperson 653 replies4 threads Member
    @bigrob pretty sure folks are just trying to help based on the limited info you’re providing. You’re saying you expected significant institutional financial aid, but a 10k draw on HELOC reduced it to zero? Doesn’t sound right. That’s why I and others suspect there might be something else going on. Just as an example: it’s hard to imagine your parents aren’t deducting expenses and depreciation on the rentals (if not, they need to talk to a CPA); some colleges add those back in, which could explain what you’re experiencing. The equity on the rentals could also be quite a bit higher In FA office’s analysis than you think. But yes, all this assumes either that you misunderstood what was said, or that a rushed and busy FA officer in the midst of a pandemic misspoke. Anyway, hope you get some answers from FA and good luck.
    · Reply · Share
  • kelsmomkelsmom 16165 replies99 threads Senior Member
    I agree that the only way for you to know what actually happened is to talk to the financial aid office again. Now that you have had time to consider their response, you should be prepared with questions and press for answers. If you don’t understand why they did something, be ready to ask for clarification.
    · Reply · Share
  • Eeyore123Eeyore123 2089 replies25 threads Senior Member
    edited July 23
    The story has changed quite a bit from the original. At first we had a low income family that took out a loan on their (implying primary) home. Now we have a family that is paying themselves by taking loans against investments. This is likely more difficult than what can be solved in an Internet forum. However, I do not disagree with the FA office classifying the loan as income. There must however be more going on than just the 10k to move from the $0 federal EFC to no institutional aid at a meets need school. Since we are dealing with rental properties, it is likely other things that are being classified as income or equity.
    edited July 23
    · Reply · Share
Sign In or Register to comment.

Recent Activity