What money is fair game for financial aid?
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Anonymous
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I don't understand the reasoning behind using home value. Is the idea that the parents should remortgage the house to pay for school? For many people living in high COL places, house equity is part of their retirement nest egg. I'd love to have enough money to both pay a ridiculously high mortgage payment AND max out my retirement savings, but I can't. I plan to retire to my hometown where I can easily buy a low cost house there with the equity I'll walk away with after I sell my DC house. If I have to remortgage it, then I won't be able to buy a house when I retire. From what I understand, if that money were tied up in a retirement account, it would be untouchable and schools wouldn't consider it as available for college expenses. Is that right?
And what about savings accounts? Aren't we supposed to have three months of living expenses sitting in a savings account? That's a lot of money for people with high mortgages like many of us in DC or for those of us with medical issues. Is the fact that we squirreled those funds away in case of job loss (single mom here) going to be used against us for need-based financial aid? |
Anonymous
CSS schools can consider home equity and retirement accounts, the logic being that if you paid into both aggressively while not saving for school, that is a choice you made and you shouldn't be rewarded. Some CSS schools will disregard or or the other or both. FAFSA considers neither. Saving accounts, brokerages, and any other money you have will be used against you. |
Anonymous
| If your HHI is between $200,000 and $300,000 and you live in a major metropolitan area, plan to go in state. Otherwise you'll be transferring one-third of your net worth to some random college somewhere. |
Anonymous
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So, if I were to refi my house and spend the funds on something responsible, like necessary home improvements (HVAC update, bathroom & plumbing improvements) will that shield the equity money?
And who determines my equity anyhow? Does the school run a report on the likely current value of my house, which has increased a lot over the past few years? Or are they looking at the house value when I purchased it and the balance remaining on the mortgage? I bought my house about 5 years ago and my neighbor recently sold her house for $300K more than what I paid. |
Anonymous
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"If your HHI is between $200,000 and $300,000 and you live in a major metropolitan area, plan to go in state. Otherwise you'll be transferring one-third of your net worth to some random college somewhere."
How does this work if you are divorced? Does the school assign an amount to each parent based on that parent's financial situation? Or do they lump the parents together as if they had joint incomes, assets, and debts and set the expected contribution on something that has no connection to reality? |
Anonymous
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CSS schools can consider home equity and retirement accounts, the logic being that if you paid into both aggressively while not saving for school, that is a choice you made and you shouldn't be rewarded. i agree that paying for college sucks, but financial aid is not for people with expensive houses and big retirement accounts. save for college or choose a less expensive way to get a college degree, i.e. dual credit, CC and then transfer to a local or nearby public U. |
Anonymous
Many colleges can't be "saved" for. It takes a different set of resources in the form of hugely unmet need or massive wealth. |
Anonymous
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^My understanding (which may not be correct) is that while the form asks for retirement accounts, they are not used by most colleges in the need calculation.
OP, the best thing to do will be to try Net Price Calculators. Each college has one, to give you a financial aid estimate. Potential issue: your OP mentions you are a single mom. If the dad is living, most colleges that use CSS Profile will also require his financial info via filing a CSS Profile himself. Some Net Price Calculators will ask questions about divorce and the noncustodial parent income and assets. Other Net Price Calculators might not, in which case you would need to make sure his financial information is included in the totals you use in the calculator in order to get an accurate estimate. Bottom line is that it's important to find out earlier rather than later if colleges are unlikely to offer sufficient need-based financial aid. Then you can focus the search on what might be affordable, either your in state public options or colleges that may offer your child substantial merit scholarships. |
Anonymous
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How much are students vs parents expected to contribute? FWIW my parents paid $0. My wealthy father wasn’t factored into financial aid bc he contributed nothing to college or much else for that matter except my step mom and step kids. Mom took out a small loan which I paid back within 2 years of graduating. All the rest was me (loans, work study and summer jobs), scholarships and a little financial aid.
I know times are different but there must still be a line item on financial aid that separates parent versus student financial contributions. |
Anonymous
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The colleges assume that relatively more of the tuition money is coming from your income rather than assets. So, for example, if you have 100K in savings, they may say that about $10K of that should be used toward tuition. You can play with a net price calculator for a specific college and see how they assess income vs assets.
Re: the pellionaires. The AGI to avoid declaring assets for Pell grant is very low, like $25K. This works for some FIRE crowd who tend to move to areas with low cost of living, but for most other people, even minimal living expenses will trigger revealing their assets. Also, the majority of at least somewhat competitive schools, including the publics, require CSS. If you are considering the kind of school that looks at FAFSA only, you'll likely end up at the same place with merit aid they offer. |
Anonymous
Student contributions will generally involve federal student loans ($5500 max for freshman year), summer earnings of a few thousand, and sometimes federal work-study during the school year. Student contributions would also include some portion of student assets, though most students don't have much - I don't know the percent. If you use a college's Net Price Calculator, you can look through the details of an estimate yourself. Much better than generalizations. |
Anonymous
It depends on the relative income and wealth for parents vs student. The colleges assess them independently. The situation with your father would be close to impossible now, unless 1) the college doesn't consider the non-custodial parent (not all do) or 2) you can prove that he basically disappeared and it is impossible or very dangerous for you to locate him. |
Anonymous
| We all choose how we spend $$. If you want to put it towards a house (car/trip/whatever) then college choices are limited to what the family can manage. There is nothing special about housing choices. If contributing to college is not a priority, it is totally fine, but don't expect the college to handle it for you. |
Anonymous
+1 College is so expensive and financial aid so common that people forget it is a form of charity, not an entitlement. |