How Will My Home Equity Impact Financial Aid?

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.

Learn more:

Borrowing for College With a Home Equity Line of Credit

Why Saving for College Won’t Hurt Financial Aid Chances



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  1. I understand that this is supposed to be helpful. However, it is not. Let me explain: Once upon a time, on a planet called earth, people bought houses so that they could have a roof over their head and a place to raise a family. Most people didn’t go to college and turned out just fine, and those that went did so because they wanted to, got in based on merit, and could afford it with a summer job. On the planet where we live now, the name of which I am unsure, people buy houses they cannot afford, that they have no intention of living in, because they think the price will magically rise and make them rich. Every kid and their dog goes to college because a mysterious voice manipulates them under duress, and they get into college based on skin color and they get aid based on the supposed value of their house, and even a good job will not help them pay for college, if they get a job at all. Nobody thinks twice about this, but they sure do complain when they don’t get something for nothing, while they take out yet another loan for a supposed education. So, in answer to the question, “how will my home equity impact financial aid?”: Wake up and smell the bullshit. In reality (which still exists to spite everyone ignoring it an wishing it away), the price of your house does not have shit to do with your kids education. The only thing that has to do with that is your kids interest and desire to learn. If you can’t afford a house, don’t buy it, or you will get foreclosed on. If your kid cannot afford college or does not want to go, don’t go, or else their future will be foreclosed on. Of course, if they still want to go after doing a cost benefit analysis, then yes, by all means, abuse the system as hard as you can. It is your only hope. Check cut-class.org for more info.

    1. That was just stupid. My parents can afford the house we live in but how can they possibly pay for me and all my siblings to go to college? My parents cant use the home equity as disposable money.
      Idiot.

      1. Sandra,

        The good news is the vast majority of colleges and universities in this country don’t use home equity when calculating financial-aid need.

        Lynn O’Shaughnessy