Reply to FA shouldn't go to people with 1 million dollar houses

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Reply to "FA shouldn't go to people with 1 million dollar houses"

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[quote=Anonymous][quote=Anonymous]I still disagree that the equity should be ignored for the financial aid purposes.  Assuming the house is really worth $1 mln with the cost of $300K, I would say downsize and move to MD or VA (yes, many do commute a long way exactly for the purpose of keeping mortgage low).  Financial aid is not faceless - it comes from contributions from real people, who overall are possibly in worse financial situation than the family with 700K equity in the house.  [/quote]

PP here.  I think you are missing the point.  The person did not pay $1 million for the house - that is the "value" that the market has inflated it to.  They paid $300K - which is presumably what they can afford - and likely have a mortgage close to that.  You say downsize and move.  How do you know they can sell the house for $ 1 million or anything close to that? That is no lock.  Assuming that they still have the same or a similar mortgage based on a $300K purchase price, you are asking them to either borrow against equity that is not amortized equity (more debt and a higher mortgage) or buy a new house with a new mortgage (thereby losing the amortized equity).  My point is that appreciation equity is a fiction and I would not expect people to borrow heavily against it.  That is why the mortgage market is a mess now.  People borrowing against appreciation. There may also be tax consequences to the family.

I get your general point - I do think that lifestyle sacrifices need to be made for private school.  I sent two kids to private school without a dime of FA. We did not take fancy vacations (Seven Springs in the winter and Ocean City or Myrtle Beach in the summer) and we always drove reasonably priced practical vehicles.  But I we only borrowed against the equity in my house to do things that would improve the value of the house and I would not require people to borrow againt the equity for tuition.  [/quote]

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