college costs / college financial aid

How Home Equity Affects College Aid

 Now that you’ve filled out the FAFSA (free application for federal financial aid) it’s time to tackle the College Scholarship Service Profile (CSS Profile) for non-federal financial aid. 

Be ready to provide your home’s purchase price, year of purchase, current value (check your property tax bill) and current debt to determine your home equity. 

Schools that require the CSS treat home equity very differently, ranging from including 100% of equity in parents’ assets (Boston College) to not considering home equity at all (Stanford). Cornell factors in 50% of equity. You aren’t necessarily expected to tap home equity to pay for college but it is used to determine how much parents should be able to pay. If you own more than one home or other real estate assets, expect to disclose this information on the CSS profile.

Parental contributions are typically 5% of their assets. Also factored in are the number of siblings attending college and many other factors. 

So, how colleges treat home equity has “an Enormous impact on what parents” are expected to pay. 

When borrowing against home equity to pay for college, avoid a home-equity loan because the entire amount available to you is considered an asset. A better choice is a home-equity line of credit. 

Lots to consider when comparing the cost of various colleges! 

And Covid-related financial set-back such as job loss further complicate the analysis. 

Thanks to Beth DeCarbo, writing for The Wall Street Journal, 10/4/19.

Source: Financial Planning for Women