I’ve been getting emails about home equity and financial aid. Consequently, I decided to run a college blog post that I wrote last year on the topic:
Before the housing bubble burst, plenty of parents worried that their home equity was going to scotch any chance of receiving college financial aid.
Even in this environment, it’s still going to be a concern for families who have owned a home for a long time.
Here’s what you need to know:
If your teenager applies to a state university, the value of your house won’t jeopardize your financial aid chances. You could live in an oceanfront home in Malibu, for instance, and it wouldn’t make one whit of difference to UCLA or just about any other public university. The Free Application for Federal Student Aid or FAFSA, which state schools use for financial aid purposes, doesn’t even ask families if they own houses.
Some private colleges and universities, however, will care. Through the CSS/Financial Aid PROFILE, they’ll want to know how much home equity you’ve got which may kill your chances for financial aid regardless of whether you live in a modest ranch-style house or wake up each morning to the sound of seagulls.
Paula Bishop, a CPA and certified college planning specialist in Bellevue, WA (and my favorite financial aid expert), tells me that what these private schools do with your home equity number is all over the board and often cloaked in secrecy. “I am shocked by how much financial aid officers don’t tell you or don’t want you to know,” she says.
What’s frustrating is when colleges refuse to divulge how they treat home equity. In February, for instance, Bishop failed to pry from a financial aid counselor at the University of Southern California how the school calculates home equity, which is no small matter in a state with gold-plated real estate. Claremont McKenna College in the Los Angeles area also stonewalled the CPA. “I’ve called them twice and got the same wishy-washy answer: ‘Sometimes we use it, sometimes we don’t.’ ”
Before applying to schools, ask them how they calculate home equity. And good luck getting straight answers.