I don’t understand why you think home equity shouldn’t be an available asset. Do you think there is no recognizable difference between a) someone who owns no home, only rents b) someone who owns a home but with little equity c) someone who owns a home with a couple 100k in equity (all else being equal)?
Clearly C) has available funds via a home equity loan or second mortgage.
Again, that asset is not counted as fully available for funding college. But some part of it is.
Buying a bigger house to shelter your assets ignores the fact that it costs more to maintain a bigger house. Harvard doesn’t care about your heating bills, higher P&C insurance, etc. People are often short-sighted when it comes to financial decisions- yes, you’d get more financial aid if your savings ended up in a McMansion vs. a three bedroom cape. But can you afford the McMansion, and what’s the likelihood that your kid is getting into Harvard- vs. one of the 3,000 colleges or so that aren’t as generous as Harvard?
CupCake- you still have a very warped sense of how financial aid works; you’ve posted this advice before. Go make yourself poor if it makes you feel better that your kid will get more aid. And then your kid graduates-- what next? Do you really want to live in a housing project and eat at soup kitchens because you spent down your savings to qualify for more financial aid? If so- more power to you. I’d rather get less in aid, find a college we could afford, and know that I’ve got a comfortable retirement ahead of me. Is that “unfair”? Colleges get to distribute their aid any way they wish. You don’t like it? Tell your kid to register online at U of Phoenix and get a degree from the comfort of your kitchen table.
That amount could easily cover an in-state flagship school. They’re a lot more straightforward about financial aid than private schools are. I’ve run NPCs for different private schools and they all seem to vary widely and change every year. Our income hasn’t changed much either. TCU, for instance…if we save 100k, the school still makes us take out $80k in parent loans, and that doesn’t include the $27k in federal student loans she would still have to take out. We could send her to Texas A&M with all expenses paid for that much.
To the OP…you need to celebrate that you actually had the ability to save money for college costs. As noted, this likely gives your kiddo options that those without savings and substantial income have.
You ran the net price calculator for Vanderbilt as your first run. How about if you do your own state flagship university. If your college savings is THAT substantial, you will likely find you have enough money to just about cover the costs for this kid to attend for four years…and that if you add in the $5500 loan she can take this year…, and her summer earnings, you are good to go.
Be grateful.
Primary home equity should really count like retirement savings. It’s inconsistent for schools to claim to have a full need no loan financial aid policy and then to expect to borrow against your home.
Primary home equity is an asset. It’s a sort of liquid asset that can be “sold” with no penalty. Retirement savings is NOT that way…it’s long term, and there are financial penalties for withdrawing it before a certain age.
Again…consider yourself fortunate that you HAVE a home with some equity. If borrowing is an issue for you…look at less costly colleges.
FA is for people who don’t have money. Saving for college gives people more choices. It allows the family to make various choices which might not be available otherwise. The colleges are not giving money to you if you already have money in the bank. The way the system works, some folks have to pay full freight and others pay nothing or next to nothing because they don’t have it. Do you think it is fair for someone who is very high income to pay 1 million to send 3 kids to good schools? Why or why not? Our society tries to help those in need and make college available to all. The choices aren’t all the same for all students but there are at least choices.
Many people can/ and do shelter their assets to account for college. Many do not. Many pay the full price. Many are unhappy.
Having the money to pay for college does give your student something else. The ability to invest in themselves. FA is not a guarantee. There are many whose college choices are decided by FA.
Use some of the money saved for test prep courses and tutors for your children to help them qualify for merit money.
Life is a game. Find out the rules and position yourself as best you can. Example:Financial aid does not take debt into consideration. With a higher income, someone with debt could look at paying down /off debt and cash flowing the student’s education.
If you managed to pay the heat and put food on the table, AND save 200k, bless you. Meanwhile, some good folks are wondering where they’ll get 5 or 10k for their kid.
Many, many of us held on to older cars, turned the heat down, watched vacations, etc. AND don’t have 200k to show for it.
Perspective.
I’ve done three yrs of FAFSA and CSS Profile and have yet to figure out how they check the provided figures for accuracy. I know they link to tax returns, but how do they know how much equity you have in your house or what you have in savings / investment? Sure the 1040 shows interest income but what if your investment account provides very little income? I don’t recall having to submit brokerage statements or mortgage balance info. Is this the honor system? would seem quite odd (although we always provide accurate info- maybe I’m an idiot).
I think that @TQfromtheU has a helpful insight. Part of what the OP is frustrated about is that he didn’t understand the rules of the game, and thought that he was doing the right thing. He played the game wrong. Maybe I’m wrong, but I don’t think the frustration is about “gee, those poor families are milking the system.” I think the frustration is about, “darn, I’m a smart, hardworking person who tries to do the right thing, and even I got duped by this crazy system.” I totally understand that frustration, as someone who is also relatively new to this whole topic. I know a lot of you have been running these numbers for a long time, and so you’re a little peeved (and some of you are a lot peeved) to hear the sentiments of OP. But try to have some empathy. The “game” is a little odd. You have to admit that. Why, for instance, in a country where practically no one has enough savings for retirement, does the formula not give any allowance for retirement savings? That seems really counter-productive to the overall financial health of the nation bc it’s encouraging people to underfund their retirement. And for most people, it is silly to imagine that selling or even taking a second mortgage on their house to pay for college is a good idea. We should all be fighting for better funding of public higher ed, instead of warring with one another about how to slice up the pie, or pointing fingers at those who seem to want too big of a slice. Apologies in advance for the cliché metaphor.
In the verification process…schools CAN ask for all kinds of documentation of your assets, home equity, etc.
Consider yourself lucky you were not asked.
Schools usually ask for info if something is out of whack. For example, if your Profile said you lived in a million dollar home, and your income was $40,000 a year…they might ask for something. Those two things don’t align.
The balances IN real retirement accounts are not considered as assets on the FAFSA or Profile forms. Yes, the Profile asks for these balances, but there is zero evidence they are used in the calculations for need based aid. The question seems to be there to see if this aligns with income. For example, if someone says they have millions in their IRA or TSA accounts, but earns $50,000 a year, someone might ask how this was possible.
Also, these IRA and TSA types of retirement accounts have early withdrawal penalties.
If you have your “retirement money” in a regular savings, or invested in real estate…or something…there is NO protection because fact is…you could spend that money on anything…including your kid’s college costs. And you could sell or withdraw your money without penalty at any time.
i’d be interested in knowing how many freshmen enroll each year at schools that meet full need by giving grant aid, and take assets into consideration - versus those schools who give no grant or institutional aid. Any ideas?
@ccprofandmomof2 Except it is far from being even close to the standard for Us to meet need. It really is a bogus argument at its foundation bc it is not a universal truth. It only applies to playing the game at approx 70 schools out of 1000s of schools.
@bgbg4us Exactly.
@ccprofandmomof2 - You just summed up my feelings on this perfectly. You think you’re doing the right thing and it doesn’t get you ahead as much as you thought it would. It starts to feel like you get penalized for doing the right thing. It makes absolutely no sense why the money you put aside for retirement is put back in your income for the purposes of calculating financial aid. (I get that it’s because saving for retirement is considered a “choice” - but it’s not really.) It can be maddening to come to the realization that if you’d chosen to remodel your house rather than pay off your mortgage, the CSS Profile school would have given you more aid and not told you, “We know you can get a HELOC.” (True story that happened to me and the difference in price was more than my mortgage payment had been.) I get the OPs frustration. You scrimp and save for YEARS and yes, it does open up more possibilities, but you wonder if you wouldn’t have just been better off living high on the hog for years and then just scrimping and saving and living lean during the college years instead.
I think there’s a small number of us here at CC with assets that are truly disproportionate to our income (and not because of an inheritance, or other windfall, or temporary situation, but rather due to having that be their financial goal) who truly understand the frustration. All those quick EFC predictors and charts that only take into account income put our EFC at $20,000/year less than what we actually would get from CSS Profile schools. It’s a significant amount. I don’t bemoan anyone else’s aid, and I certainly would rather be in this situation than one with a $0 EFC, but it is frustrating and as it was said above, instead of belittling the OP (and me and others) for the frustration, we should all be fighting for lower college costs.
P.S. Based on our experiences when #1 went though this, we hired a contractor and have done some remodeling. I’m going to write a big check this week and then submit the FAFSA and CSS Profile. It doesn’t affect our ability to pay, but it actually affects our EFC.
There are lower cost colleges…in this case, they just don’t meet the OPs expectations.
Retirement funds are NOT counted, when they’re in a QRF, qualified retirement fund. Yes, there’s a lot to understand. You can Google what’s a QRF.
And the QRF question is asked in order to gauge future $ stability. Somewhere, there was a previous explanation bullet.
Thing is, yes, the more you have, the more they assess. But that hypothetical 200k is not charged. It’s the 5.6%, for parents. Not sure why OP got 13k. (But colleges nearly always ask for more Family Contribution than the FAFSA shows. Different considerations.)