A college has issued a financial aid offer with a net price that is several thousand dollars higher than their net price calculator says. A likely explanation is that the college used a much higher home valuation (e.g. Zillow) than the real value, and for the purposes of this discussion let’s assume the net price discrepancy is indeed due to home valuation.
The college uses CSS and counts 100% of home equity as an asset, so if they overvalue a home by $100k or $200k, then the net price (using 5%) is increased by $5k or $10k per year. This not only stretches the budget in year 1, but exposes us to risk of unknown even higher future home valuation, hence unknown higher college net price in years 2,3,4, going from budget-stretching to budget-busting. We need 4 year price predictability.
The question is if/when/how to approach the college’s financial aid office about this (which I’d really rather not have to do). Should we directly ask what number they used for home valuation, where they got that number (e.g. Zillow), and if and how this number could be disputed? Should we suggest they use the FHFA HPI Calculator https://www.fhfa.gov/DataTools/Tools/Pages/HPI-Calculator.aspx (which may still be too high, but not as bad as Zillow)? Might we need to get an appraisal? Some neighborhood houses have been substantially remodeled/modernized, but this house inside is unchanged (though aged) in decades and would only sell for a much lower price than others nearby.
One option is to wait until end of March when all the RD results come out, since acceptance at a higher ranked college, with bigger endowment, better financial aid (counting no or capped home equity), will lead to an easy decision to choose a better cheaper college. If a better offer comes through, we can avoid the house value issue, but if not, we have to scramble in April to see what can be done (so should we start a discussion now that may turn out later to be unnecessary?).
Any ideas if/when/how to approach the college’s financial aid office about home valuation and net price?
I would simply start a conversation with FA and go line by line comparing what’s different between the NPC and the FA offer. It might not be due to home equity.
Have you played with the college’s NPC and home equity? Most colleges cap the impact of home equity in their FA formula. So, say income is $250K, they would cap the impact of home equity at $300K or 1.2x income. Some schools don’t consider home equity at all.
Can you tell what this school’s policy is either from their website, or by putting different scenarios in the NPC?
I’ve played with lots of NPCs, including varying inputs to determine how a college treats home equity, if they use 100% of it, or none of it, or capped at a multiple of income, and if so, what the multiplier is (assuming the NPC is correctly set up to model the college’s policies).
This college appears on lists of colleges that count 100% of home equity, and playing with their NPC clearly confirms this, so I’m sure about that.
As to the explanation of why the FA offer had higher net price than NPC, it’s just my educated guess that it’s due to their choice of home value. But long ago when learning about all this, I realized that with 100% home equity colleges, you are fully exposed to deemed home value for 4 years, at risk that price could get too high (maybe partway through degree), whereas this is not a problem with colleges that cap home equity.
Once you are sure the college is a no-cap 100% equity school, you might say something like this…because you want some level of FA predictability over the 4 years:
All you can is raise your concerns and hope the FA director will take that into an account. I would recommend talking with at least a director level staffer. Personally I wouldn’t wait to talk to them about this, especially if you might need to get an appraisal and/or this school is the ultimate best option.
Okay, thanks, I agree with your suggestion to contact them sooner rather than later.
It’s a tricky situation, as I am basically suspecting them of using a higher home valuation, and now I’d be digging into it. They could be revenue-sensitive, so I don’t know what their position would be.
I have to figure out how to address this topic. This is new to us (S24 is our oldest, and we parents are from overseas) so I appreciate forum’s wisdom on how to communicate with a FinAid office.
Schools have policies regarding how they treat various things, and it isn’t always easy to convince them to vary from their policies. If you feel strongly that the number they used doesn’t reflect reality, you can try to convince them why a different valuation is more reasonable. Begin by asking about the difference between the NPC and their expected contribution. That will open the door to communication about whatever issue it turns out to be. Do it now, because they are probably less busy now than they will be later. If the outcome doesn’t serve you, be honest about the fact that the finances aren’t going to work for you. Give a number that you would need in order to attend, and be prepared to walk away if you don’t get it.
This is really all you need. Approach them with this observation, and ask them politely but directly for an explanation. Your speculation may be correct, but don’t jump ahead, let them explain it first, then go from there. As long as you stay polite and non-confrontational, the worst that can happen is you will learn they are not flexible about whatever they are doing. But perhaps it is an error, or something they will be willing to adjust.
In my experience getting into detailed discussions of calculations with multiple FA offices, they are happy to provide details. Two takeaways: 2) they want to help, 2) they need to treat everyone equitably. There are some areas they might have flexibility and other areas they don’t.
I think the best approach is to try to figure out with them the reasons for the difference in the NPC number and their actual aid offer.
Thank you everyone for the advice. I should make contact soon, and I’m thinking about what to include to start with, but I’ll probably keep the initial inquiry succinct and see what they tell us.