The Value of Your Home Could Impact Financial Aid at Top-Tier Colleges: A Closer Look - Chernov Team

The Value of Your Home Could Impact Financial Aid at Top-Tier Colleges: A Closer Look

Many parents in the Studio City, Sherman Oaks, and Encino areas have children enrolled in high-end schools with an eye towards attending top-tier universities after graduation. Given that it is fall, many of these children are hunting for spots in these elite universities; it’s time to take a look at how your assets (property values in particular) will impact the cost of those schools. At the end of the day, your home’s equity has an impact on the amount of financial aid students/parents can expect to receive.

Virtually every college requires applicants requesting financial aid to complete the Free Application for Federal Student Aid (“FAFSA”), and many of the high-end colleges also require parents to fill out the College Scholarship Service Profile (“CSS Profile”), which provides financial aid outside the federal programs. While the FAFSA doesn’t take home equity into account, the CSS Profile does; you will be required to provide information pertaining to the purchase price of your home, when the home was purchased and for how much, and how much debt remains on the property. 

While having an expensive home doesn’t necessarily mean you will have to shell out the full cost of college, it does mean that the colleges will expect you to cover more costs than someone without a high-value would have to. Specifically, schools generally value parental contribution at 1/20th of total assets. Assuming your only asset is your home, and your home equity is $1M, you would be expected to cover $50k per year (some schools look at total value of the property, so the same house might actually be worth $2M meaning you’d cover $100k per year). This is an over-simplified explanation, as schools look at all assets in light of a number of other factors – this article is limited to home equity though. 

Keep in mind that all property will be considered in your CSS Profile application – this means vacation homes and investment properties. Moreover, if you sold an investment property prior to requesting aid, the capital gains on that sale will be taken into an account as well (assuming those gains were reported on the current year’s taxes).

You might be asking how to use this information; we don’t leave our readers hanging. First and foremost, get the relevant information before applying – call the schools’ financial aid departments and find out how they calculate home-equity. Next, resist the temptation to inflate the value of your home – it will only work against you. Instead, use truly comparable home values (obviously, don’t lie – that’s very different than choosing a lower number on a spectrum of comparable properties, however).  Finally, if the determination seems wildly unfair in light of your circumstances, appeal the schools’ decision to grant you less financial aid – you miss 100% of the shots you don’t take. 

If you need a free home valuation, the Chernov Team is always happy to provide one.

At the Chernov Team we understand that knowledge is power, and knowledge of how to send your children to top-tier schools without going bankrupt because you made smart real estate investments is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most. 

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