You’ve worked diligently for years to be responsible with your bills and make payments on your mortgage. As a result, you’ve probably built up some equity in your home. If you’re especially fortunate, the real estate market in your area may have also added to your home’s value.
Now that you have equity in your home, however, is that going to hurt your quest for financial aid?
Discover the relationship between home equity and college financial aid, and what you can do to maximize your college funding.
Home Equity Impacts College Aid on the CSS Profile
If your student chooses a school that only uses the FAFSA, home equity will not be part of the calculation. However, some schools use the CSS Profile, which asks you to estimate the current market value of your home.
It’s possible that a percentage of your home equity will be added to your EFC, as though that money were available for you to use for college.
Unfortunately, each school that uses the CSS Profile treats home equity differently, so there’s no easy way to know whether your equity will ruin your chances of aid at a particular college.
Some schools will ignore home equity even if they use CSS. Others will consider home equity as a major asset, and a large value can ruin your aid chances. Finally, a third group uses home equity with a cap so that it’s only a moderate hit.
You can find out which category your target schools are in by emailing the financial aid office, although they may not be forthcoming.
What if Your Home Is Overvalued?
Knowing the exact market value of a property is difficult, and schools will use a variety of tools to double-check your estimate. Unfortunately, that can overvalue your home significantly.
One parent in our Paying for College 101 Facebook group expressed this concern, saying, “The calculator just overestimated my home value by $130K, based on the Zillow estimate.”
Another member of the group advised, “My suggestion would be to anticipate that the school is going to use a Zillow or Redfin estimate if your reported value is lower than the online values, and proactively write an explanation as to why those figures are too high.”
You can also wait until the aid package is received, and if the school in question is a top contender, ask for a reconsideration of your aid based on the home equity numbers being incorrect.
Most of the Time Home Equity Does Not Impact Financial Aid
Remember that only about 240 schools nationwide use the CSS Profile. While this includes many prestigious universities, it doesn’t cover all of the high-quality education available for your student.
Don’t be afraid to steer away from a CSS school if you have significant home equity. You can maximize your chances of getting better aid by focusing on FAFSA-only schools.
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