FA Question: Inherited house, now worth $1M, now what?

[Anonymous]

For those that say that they think their calculated parental contribution is too steep, I have a few questions.

1) When did you start to save for your child(ren)'s college?
2) How did you determine how much to save? Did you research expected college costs?
3) When did you think your child would be college bound? How old were your children?


I'll answer for me:

1) We started before we had children because the expected costs were so large.
2) We figured out what the expected costs for instate costs would be and saved that amount in college designated accounts and saved more in other vehicles that we could tap (eg Roth IRA, regular savings).
3) I expected them to go to college from the beginning, so it was in our plan from the beginning.

Our income is more than the OP but less than the other PPs who have posted. We will have enough for our both our children (one is a senior and one is a sophomore in HS) to attend nearly eery school. It will would have been extremely tight if they got $0 and both went to the Benningtons of the world- but that is not likely at this point. Elder is applying to state schools in VA and out of VA.

[Anonymous]

Anonymous wrote:This is just nauseating as it encourages people not to save. As pp said above, if the inheritance was given in stock and had increased to $1m it would be expected to pay for college.

This is ridiculous. Do you own a home? I might ask you why you why you haven't sold it and used the proceeds to pay for college, which is what you are saying OP should do.

And if OP had inherited cash or stock instead of a home, it would have been perfectly reasonable for her to have used that money to....buy a home. In which case, she would be exactly where she is now--with most of her assets in a primary residence, the value of which counts towards the expected family contribution, up to a cap based on HHI.

Do you know ANYONE who has forgone purchasing a home to live in in favor of saving money for college? I'm guessing you don't. Why are you expecting this of OP?

Furthermore, you need to realize that financial aid is based primarily on income. The "penalty" for saving is actually very small, as discussed in the link below. And retirement savings aren't counted at all. (My guess is that the OP has very little in retirement savings, so if it makes you feel better, you can think of her house as her IRA.)

http://www.thecollegesolution.com/why-college-savings-usually-wont-hurt-financial-aid-chances/

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It's hilarious that people here are telling the OP she doesn't deserve financial aid. I think most of the NESCAC schools will disagree. Clearly few people here understand how financial aid works.

No matter what form the school uses, financial aid is based predominantly on family income and savings/investments that are in the **student's** name. Parent savings, investments, and real estate count much, much less.

OP, have you run the net price calculator on the websites of the schools your DD is interested in? I pulled up Middlebury's and plugged in some dummy numbers based on the info you provided: a HHI of $104k, a home value of $950k, mortgage of $0, and 4 children, with $10k in savings. Middlebury's net price calculator spit out the following:

Total cost in first year: $61,360

Expected family contribution: $11,358

Total financial need: $50,002

Estimated financial aid package: $50,002
-Middlebury scholarship: $45,202
-Student loan: $3,000
-Campus job: $1,800

OP, please run the net price calculators yourself. Likely your DD will qualify for significant financial aid at schools that pledge to meet full need. No college really expects you to sell the family home in order to pay for college.

This just blows me away. I did it, and granted we have a good income (250K per year), but I was curious. And they are saying that our expected famiy contribution is $59K per year. How on earth do they figure that?! (FWIW we do have a well funded 529 account, I'm just making this observation -- private college is impossible for many people who have decent incomes.)

College is not an unexpected expense. Colleges do not set the parental contribution based on an ability to pay out of ones paycheck. Parents are expected to save ahead of time. It is the same for retirement or saving for a downpayment on a house. There are long term saving issues.

This is wrong. Financial aid is based primarily on income, not savings.

[Anonymous]

Anonymous wrote:For those that say that they think their calculated parental contribution is too steep, I have a few questions.

1) When did you start to save for your child(ren)'s college?
2) How did you determine how much to save? Did you research expected college costs?
3) When did you think your child would be college bound? How old were your children?


I'll answer for me:

1) We started before we had children because the expected costs were so large.
2) We figured out what the expected costs for instate costs would be and saved that amount in college designated accounts and saved more in other vehicles that we could tap (eg Roth IRA, regular savings).
3) I expected them to go to college from the beginning, so it was in our plan from the beginning.

Our income is more than the OP but less than the other PPs who have posted. We will have enough for our both our children (one is a senior and one is a sophomore in HS) to attend nearly eery school. It will would have been extremely tight if they got $0 and both went to the Benningtons of the world- but that is not likely at this point. Elder is applying to state schools in VA and out of VA.

Glad things have worked out for you. But so much depends on the details. I always expected my children would go to college, too, but we faced some limitations on saving in the early years. First, we both had student loans to pay off. Second, when our children were young, we earned our HHI from two fairly equally paid jobs, so we both had to work to maintain anything like a middle class lifestyle in this area, which meant for many years we had substantial child care expenses. Third, until recently, our HHI was quite a bit lower--we have had a 25% increase in HHI in the last 5 years or so. (Virtually all of that has gone to college savings; in fact, the job and its higher salary was taken with the goal of earning more in order to save more for college.) Fourth, when we faced limitations on saving, we always chose to save for retirement first.

Nevertheless, we expect to have enough in savings and income to pay full price at an in-state public. (And we are on target with retirement savings.) But we won't be able to afford private unless our children receive enough merit aid to bring the cost close to what our state schools cost. We can pay $30k per year; we cannot pay $50k. (Our kids won't be in college at the same time, so over 8 years of college we will actually spend more than a similar family whose kids will be in college at the same time for some years.) Frankly, I feel we have managed quite well.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It's hilarious that people here are telling the OP she doesn't deserve financial aid. I think most of the NESCAC schools will disagree. Clearly few people here understand how financial aid works.

No matter what form the school uses, financial aid is based predominantly on family income and savings/investments that are in the **student's** name. Parent savings, investments, and real estate count much, much less.

OP, have you run the net price calculator on the websites of the schools your DD is interested in? I pulled up Middlebury's and plugged in some dummy numbers based on the info you provided: a HHI of $104k, a home value of $950k, mortgage of $0, and 4 children, with $10k in savings. Middlebury's net price calculator spit out the following:

Total cost in first year: $61,360

Expected family contribution: $11,358

Total financial need: $50,002

Estimated financial aid package: $50,002
-Middlebury scholarship: $45,202
-Student loan: $3,000
-Campus job: $1,800

OP, please run the net price calculators yourself. Likely your DD will qualify for significant financial aid at schools that pledge to meet full need. No college really expects you to sell the family home in order to pay for college.

This just blows me away. I did it, and granted we have a good income (250K per year), but I was curious. And they are saying that our expected famiy contribution is $59K per year. How on earth do they figure that?! (FWIW we do have a well funded 529 account, I'm just making this observation -- private college is impossible for many people who have decent incomes.)

College is not an unexpected expense. Colleges do not set the parental contribution based on an ability to pay out of ones paycheck. Parents are expected to save ahead of time. It is the same for retirement or saving for a downpayment on a house. There are long term saving issues.

This is wrong. Financial aid is based primarily on income, not savings.

10% of parental saving and 35% of student's saving is considered to be okay for each year. Just because income is primary, doesn't mean the savings isn't a significant factor.

[Anonymous]

This looks like a loop hole. Completely ridiculous that if someone inherits a million dollars vs a million dollar house they would get aid. The system is broken.

[Anonymous]

The value of a family's primary residence has not been considered by the federal need analysis methodology since the 1993-94 academic year. Nevertheless, many private colleges and universities do take home equity (the market value of the home minus the unpaid mortgage) into account. Moreover, if the family owns a second home, the net value of that home is considered by both the federal and institutional formulas.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It's hilarious that people here are telling the OP she doesn't deserve financial aid. I think most of the NESCAC schools will disagree. Clearly few people here understand how financial aid works.

No matter what form the school uses, financial aid is based predominantly on family income and savings/investments that are in the **student's** name. Parent savings, investments, and real estate count much, much less.

OP, have you run the net price calculator on the websites of the schools your DD is interested in? I pulled up Middlebury's and plugged in some dummy numbers based on the info you provided: a HHI of $104k, a home value of $950k, mortgage of $0, and 4 children, with $10k in savings. Middlebury's net price calculator spit out the following:

Total cost in first year: $61,360

Expected family contribution: $11,358

Total financial need: $50,002

Estimated financial aid package: $50,002
-Middlebury scholarship: $45,202
-Student loan: $3,000
-Campus job: $1,800

OP, please run the net price calculators yourself. Likely your DD will qualify for significant financial aid at schools that pledge to meet full need. No college really expects you to sell the family home in order to pay for college.

This just blows me away. I did it, and granted we have a good income (250K per year), but I was curious. And they are saying that our expected famiy contribution is $59K per year. How on earth do they figure that?! (FWIW we do have a well funded 529 account, I'm just making this observation -- private college is impossible for many people who have decent incomes.)

College is not an unexpected expense. Colleges do not set the parental contribution based on an ability to pay out of ones paycheck. Parents are expected to save ahead of time. It is the same for retirement or saving for a downpayment on a house. There are long term saving issues.

This is wrong. Financial aid is based primarily on income, not savings.

10% of parental saving and 35% of student's saving is considered to be okay for each year. Just because income is primary, doesn't mean the savings isn't a significant factor.

I don't think this is correct. Do you have a source for this info?

http://www.forbes.com/sites/troyonink/2014/02/14/how-assets-hurt-college-aid-eligibility-on-fafsa-and-css-profile/

According to this link, parental assets not in retirement accounts (checking, savings, money market, investment real estate, stocks, bonds, mutual funds, and 529 plans) are valued after subtracting an allowance of $30k-$50k. Parents are expected to use up to 5.6% of the net value of these assets. Assets in the students name don't get the savings allowance; students are expected to use 20-25% per year of these. (Note that most 529s are considered assets of the parent who is funding them, not the student.)

As your income rises, savings become more and more irrelevant. A family in VA with a HHI of $150k and $0 savings will have an EFC of about $19,600 at Harvard. If that same family has $200k in savings, the EFC rises to $24,600. IOW, the penalty for saving $200k will be less than $20k over 4 years. And of course, at the end, after paying for college you would still have $100k left over in the savings account, whereas the family with $0 savings might have taken on tens of thousands of dollars in debt to pay its slightly lower EFC. So is saving discouraged under these formulas? I don't think so but ymmv.

[Anonymous]

Anonymous wrote:This looks like a loop hole. Completely ridiculous that if someone inherits a million dollars vs a million dollar house they would get aid. The system is broken.

Again, this attitude demonstrates both a lack of knowledge about how FA works and a fair bit of hypocrisy. Do you own a house? Are you selling it to pay for college?

Also, the OP did not inherit a $1m home. She inherited a home worth much less than that. If it were in southern CA, it might be worth less now than it was when she inherited it. Assuming you own a home in the DC area, the same housing market that has pushed the value of her home so high gas also benefitted you.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This looks like a loop hole. Completely ridiculous that if someone inherits a million dollars vs a million dollar house they would get aid. The system is broken.

Again, this attitude demonstrates both a lack of knowledge about how FA works and a fair bit of hypocrisy. Do you own a house? Are you selling it to pay for college?

Also, the OP did not inherit a $1m home. She inherited a home worth much less than that. If it were in southern CA, it might be worth less now than it was when she inherited it. Assuming you own a home in the DC area, the same housing market that has pushed the value of her home so high gas also benefitted you.

possibly. but if the home is worth 1M now it means that it is larger, closer in/shorter commute with better schools than most homes where the rest of us live. OP and her family have had it better than vast majority of others, including many who earn more (and arguably, deserve it more). it seems unfair that she should get so much aid.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This looks like a loop hole. Completely ridiculous that if someone inherits a million dollars vs a million dollar house they would get aid. The system is broken.

Again, this attitude demonstrates both a lack of knowledge about how FA works and a fair bit of hypocrisy. Do you own a house? Are you selling it to pay for college?

Also, the OP did not inherit a $1m home. She inherited a home worth much less than that. If it were in southern CA, it might be worth less now than it was when she inherited it. Assuming you own a home in the DC area, the same housing market that has pushed the value of her home so high gas also benefitted you.

possibly. but if the home is worth 1M now it means that it is larger, closer in/shorter commute with better schools than most homes where the rest of us live. OP and her family have had it better than vast majority of others, including many who earn more (and arguably, deserve it more). it seems unfair that she should get so much aid.

Um, what?

[Anonymous]

Anonymous wrote:You could sell the million dollar house, move into a 200k apartment, and use the 800k profit for college expenses.

It's so easy to be smug when telling someone else what to do. Thus is one of the nastiest threads I've seen in the college posts. If someone totaled my car, I couldn't replace it for what I would get gor or. You can't replace a house for a famy of 6 so easily either. Sounds like the girl works hard, is s good student, family frugal . Those are contributors to a community, not takers, like all these high income people passing judgement, hoarding their income and not wanting to share a thing.

[Anonymous]

Sorry typos^^

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This looks like a loop hole. Completely ridiculous that if someone inherits a million dollars vs a million dollar house they would get aid. The system is broken.

Again, this attitude demonstrates both a lack of knowledge about how FA works and a fair bit of hypocrisy. Do you own a house? Are you selling it to pay for college?

Also, the OP did not inherit a $1m home. She inherited a home worth much less than that. If it were in southern CA, it might be worth less now than it was when she inherited it. Assuming you own a home in the DC area, the same housing market that has pushed the value of her home so high gas also benefitted you.

possibly. but if the home is worth 1M now it means that it is larger, closer in/shorter commute with better schools than most homes where the rest of us live. OP and her family have had it better than vast majority of others, including many who earn more (and arguably, deserve it more). it seems unfair that she should get so much aid.

Um, what?

Umm, like OP is making very little money, probably because she SAHMed. Her kids went to great schools and she lived close to the city. So she lived very well, better than many people making more money (i.e. actually creating value for society) who live in shitshacks far away in crappy school districts. Not sure what is it that you are not getting.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This looks like a loop hole. Completely ridiculous that if someone inherits a million dollars vs a million dollar house they would get aid. The system is broken.

Again, this attitude demonstrates both a lack of knowledge about how FA works and a fair bit of hypocrisy. Do you own a house? Are you selling it to pay for college?

Also, the OP did not inherit a $1m home. She inherited a home worth much less than that. If it were in southern CA, it might be worth less now than it was when she inherited it. Assuming you own a home in the DC area, the same housing market that has pushed the value of her home so high gas also benefitted you.

possibly. but if the home is worth 1M now it means that it is larger, closer in/shorter commute with better schools than most homes where the rest of us live. OP and her family have had it better than vast majority of others, including many who earn more (and arguably, deserve it more). it seems unfair that she should get so much aid.

Um, what?

Umm, like OP is making very little money, probably because she SAHMed. Her kids went to great schools and she lived close to the city. So she lived very well, better than many people making more money (i.e. actually creating value for society) who live in shitshacks far away in crappy school districts. Not sure what is it that you are not getting.

Bah ha ha ha ha ha ha ha hah! You think that you deserve more FA because you chose to live in the middle of nowhere so you could also have a huge freaking house while you enjoy your fabu "value-creating" job in some cubicle 30 miles away?

You chose to buy a shitshack in Manassas. Deal with it.