{"id":1094,"date":"2022-11-17T09:58:52","date_gmt":"2022-11-17T14:58:52","guid":{"rendered":"https:\/\/collegeaidpro.com\/?p=1094"},"modified":"2022-11-17T10:06:18","modified_gmt":"2022-11-17T15:06:18","slug":"how-home-equity-affects-the-css-profile","status":"publish","type":"post","link":"https:\/\/collegeaidpro.com\/how-home-equity-affects-the-css-profile\/","title":{"rendered":"How Home Equity Affects The CSS Profile"},"content":{"rendered":"

How Home Equity Affects the CSS Profile.<\/span><\/h2>\n

Will the equity you\u2019ve built in your home impact your college-bound child\u2019s opportunity to secure adequate financial aid? Like most questions about college, the answer isn\u2019t a simple yes or no. Let\u2019s start with a more basic question, what is home equity?<\/span><\/p>\n

Home equity is the amount of your home that you actually own. More specifically, your home equity is the market value of your home minus all liabilities. So, if you have a primary mortgage and a home equity line of credit (HELOC), both should be subtracted from your market value to get your home equity.\u00a0<\/span><\/p>\n

For most of our adult lives, the idea of building equity has always been a good thing. We purchase a home, make monthly payments on our mortgage and in return own more of our home. Unfortunately, for some parents, significant home equity can have a detrimental effect on a financial aid package for their college-bound children. This presents a planning opportunity for many families if you are in the know and understand how home equity works in the world of financial aid.\u00a0<\/span><\/p>\n

Home equity is not reported on the FAFSA<\/a>. The FAFSA is the financial aid form required by almost every college in the US. It is used by the US Department of Education to assess federal need-based aid eligibility for grants, loans, and work study. About 90% of colleges use the Federal methodology (FAFSA) to award need-based aid from their school endowments as well. The majority of colleges will not look at your home equity to determine your need-based financial aid. However, there is a second financial aid form, used by some schools, called the CSS Profile that can use home equity in their financial aid eligibility calculation.<\/span><\/p>\n

Learn more about the Federal EFC (Expected Family Contribution): Understanding the Expected Family Contribution in FAFSA<\/a><\/p>\n

What\u2019s The CSS Profile?<\/span><\/h2>\n

The <\/span>CSS Profile<\/span><\/a> is an additional financial aid application used by around 400+ colleges. Parents and students must complete the CSS Profile in addition to the FAFSA. Federal need-based aid eligibility is still determined by the FAFSA, but the CSS Profile is used by the colleges to determine aid that comes directly from the university\u2019s endowment fund.<\/span><\/p>\n

How Does The CSS Profile Calculate Financial Need?<\/span><\/p>\n

The CSS Profile uses the Institutional Methodology to determine need-based aid eligibility. In the 2022-2023 application season, the CSS Profile assesses parent assets at a rate of approximately 5%. Your home equity is considered a parental asset. The CSS Profile asks for your home purchase price, purchase year, current value, and current debt. Their software calculates the equity in your home by subtracting your current debt from the current value. So, hypothetically, if you have $50,000 in home equity, you could be tacking $2,500 onto your total assets as they\u2019re determined by the CSS Profile (and your student\u2019s financial aid offer could drop by this amount).<\/span><\/p>\n

Learn more about the Institutional Methodology used at most private schools: The 3 Different Types of Expected Family Contribution Explained<\/a><\/p>\n

What Are The Rules Regarding Home Equity and the CSS Profile?<\/span><\/h2>\n

As with most things in the world of financial aid, it\u2019s not as simple as a flat 5% calculation. Depending on the college or university, home equity may be capped at a certain rate due to bank limits on how much homeowners can borrow against their mortgage. Often the home equity cap will be a multiplier of a family\u2019s income (think: 1.2x total income, or 2.0x total income).\u00a0<\/span><\/p>\n

This actually works in favor of families who are applying for aid.<\/span><\/p>\n

For example, College A uses the full value of your home equity as a parental asset.\u00a0 If your current home equity is $300,000 at 5%, your parent contribution goes up by $15,000.<\/span><\/p>\n

College B caps your home equity at 1.2x your total income. If your home equity is $300,000 and\u00a0 total family annual income is $180,000, your parent contribution only goes up by $10,800.\u00a0<\/span><\/p>\n

(1.2 x $180,000 = $216,000 x 5% = $10,800)<\/span><\/p>\n

College A\u2019s assessment of your parent contribution with full home equity adds an extra $4,200 compared to College B\u2019s assessment that caps your equity.<\/span><\/p>\n

Are All CSS Profile Schools Looking At Home Equity?<\/span><\/h2>\n

The short answer is no \u2013 they\u2019re not. In fact, in the coming years, many college planning experts expect a trend where universities stop looking at home equity in a primary residence altogether. Some leading universities, <\/span>such as Stanford<\/span><\/a>, have already made this change. Other colleges that are generous with need-based financial aid are expected to follow suit.\u00a0<\/span><\/p>\n

Learn more about the CSS Profile: 2023-2024 CSS Profile Dos, Don\u2019ts, and Updates<\/a><\/p>\n

What About Vacation Homes or Rental Properties?<\/span><\/h2>\n

The rule regarding home equity caps or omissions only counts toward primary residences. In other words, you have to live there full time (or for most of the year). Both the FAFSA and the CSS Profile include net income from rental properties and the home equity in vacation homes, as parental assets when calculating need-based aid.\u00a0<\/span><\/p>\n

This is important to remember, especially if you own a \u201cfamily vacation home\u201d that may not seem to hold much financial value. In recent years, many properties across the country have appreciated significantly, and could negatively impact your financial aid.<\/span><\/p>\n

How Do I Use This?<\/span><\/p>\n

First, figure out if the colleges you are considering require the <\/span>CSS Profile.<\/span><\/a> If your school is on this list, your home equity may factor into your institutional need-based financial aid offer. Next, <\/span>sign up for your free MyCAP account here.<\/span><\/a> With your free account, you\u2019ll be able to search colleges across the country and get a sense of what the actual net cost of attendance will be for your college-bound student \u2013 home equity, and all!\u00a0<\/span><\/p>\n

Learn more about applying for financial aid: Applying for Financial Aid: FAFSA and CSS Profile<\/a><\/p>\n

Have More Questions?<\/span><\/h2>\n

We\u2019re here to support you! Don\u2019t miss our recent update on the <\/span>2023-2024 CSS Profile changes<\/span><\/a>, and sign up for our <\/span>Office Hours <\/span><\/a>to get all of your questions answered by our team of college experts!<\/span><\/p>\n

Register for our FREE Bi-Weekly Office Hours webinar hosted by a CAP expert. Get all your college planning questions answered: Register for Office Hours<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

How Home Equity Affects the CSS Profile. Will the equity you\u2019ve built in your home impact your college-bound child\u2019s opportunity to secure adequate financial aid? Like […]<\/p>\n","protected":false},"author":5,"featured_media":52,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":""},"categories":[5,11,91,7],"tags":[31,32,40,71,188,189],"acf":[],"featured_image_src":"https:\/\/collegeaidpro.com\/wp-content\/uploads\/2022\/08\/blog-img-3-600x400.png","featured_image_src_square":"https:\/\/collegeaidpro.com\/wp-content\/uploads\/2022\/08\/blog-img-3-600x480.png","author_info":{"display_name":"Bill Rabbitt","author_link":"https:\/\/collegeaidpro.com\/author\/rabbs\/"},"_links":{"self":[{"href":"https:\/\/collegeaidpro.com\/wp-json\/wp\/v2\/posts\/1094"}],"collection":[{"href":"https:\/\/collegeaidpro.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/collegeaidpro.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/collegeaidpro.com\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/collegeaidpro.com\/wp-json\/wp\/v2\/comments?post=1094"}],"version-history":[{"count":0,"href":"https:\/\/collegeaidpro.com\/wp-json\/wp\/v2\/posts\/1094\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/collegeaidpro.com\/wp-json\/wp\/v2\/media\/52"}],"wp:attachment":[{"href":"https:\/\/collegeaidpro.com\/wp-json\/wp\/v2\/media?parent=1094"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/collegeaidpro.com\/wp-json\/wp\/v2\/categories?post=1094"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/collegeaidpro.com\/wp-json\/wp\/v2\/tags?post=1094"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}