College is an incredibly expensive venture, especially when it comes to the most prestigious universities which can cost upwards of $70,000 Annually. Ivy league, private, and out of state schools can all surmount to increased expenses.
The first few month of the year are a popular time to apply for school and many of us are completing FASFA and potentially a CSS Profile. If not, we might be planning our children’s college fund or just worrying about the expenses and whether financial aid will be granted to us.
It’s entirely reasonable to worry about such a major expense since in some cases the cost of college for a child or several children can cost as much or more than the family home. However, this worrying might be exacerbated by some false facts about financial aid, widely accepted by the parents of future college scholars.
Financial Aid: Income VS Savings
According to the Federal Student Aid Office up to 47% of the “need” for aid assessed is determined by parental income. While the assets, including savings accounts, make up far less of the weight at 5.64% of the calculated "need". (FSAO)
For parents who have been saving for their children and worried this may have had a significant negative effect on their chances of obtaining financial aid, this should be music to their ears. Especially since those savings will help prevent the family from encountering college debts which can cost double what was initially borrowed over the course of their repayment.
Is home equity considered savings by the Federal Student Aid Office?
No, but the college board (operated in the United States) which uses the CSS Profile does take home equity under consideration. Therefore, if the university being applied to exclusively uses the FASFA, home equity won’t be considered. Typically, the CSS Profile is used by private schools to determine who will be awarded institutional money from the university. The CSS Profile examines assets, including the home and this measurement of assets makes up 5% of the calculated “need” rating. (CSS)
The best way to determine how your finances will be treated by a university when applying for a need-based aid is to use that university’s net price calculator (commonly found on their website) or by asking them directly. It’s important to realize that not all schools are alike and that everyone who is accountable for the price of schooling should do their homework.
The best way to prepare for an expense like college is to speak with a financial advisor who has helped many families plan for the expense. We have all seen the effect of student debt to some degree and it’s important to understand the need for proper planning. Click to speak with Michael Romanello about college planning for your children or grandchildren.