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

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]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.
[/quote]

Thank you! I posted earlier that we're new to this game, so this is super helpful! I'm feeling less depressed about college costs already! [/quote]

You're welcome. I strongly recommend this website as a resource:

http://thecollegesolution.com

And this post there directly addresses your concern:

http://www.thecollegesolution.com/will-your-home-equity-hurt-financial-aid-chances/

As outlined here, normally CSS calculates that 5% of home value is available for financial aid. So, for a house worth $950k, CSS would assess home equity at $47,500 per year. This would likely make most families with this much home equity completely full-pay, ineligible for need-based financial aid. However, the folks at CSS understand that you can't borrow money, no matter how well secured by your house, if you can't afford the loan payments. CSS thus caps the home equity contribution at two times family income. So if your HHI is $104,000, CSS would assess the home equity contribution at 5% of $208k, or $10,400 (per year). Other assets and income are then assessed and added to the $10,400 to arrive at your estimated family contribution.

Since your DD will need substantial financial aid to attend college, it will be very, very important that she find colleges that meet financial need AND for which she is a strong candidate. Make sure she includes full-need schools that have relatively high acceptance rates, such as women's colleges like Wellesley, Smith, and Barnard, and SLACs that are outside New England/NY, since these tend to accept a greater share of their applicants. Midwest LACs like Oberlin, Kenyon, Macalester are considered very fine but don't receive as many applications as many of the NE schools and so accept a greater share. Others to consider: Wooster, Clark, Dickinson, Gettysburg, Sewanee, Saint Olaf. Be straight up with your DD: She needs significant financial aid to go to college. Make sure she understands that financial aid will be the most important factor in determining where she goes. Discourage the notion of a "dream" school. Be matter of fact about it. It's not a dream school if you can't afford it.[/quote]

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