When is Home Equity An Assessable Asset?

FAFSA, CSS PROFILE, and Consensus 568 Schools

College tuition fees are rising to a point where it becomes problematic to not have your financial aid reduced if you saved for college for your children (example  529 plans) and you built equity in your house.

This makes it even more important for us to understand home equity calculation for financial aid in order to ensure that you are treated fairly with the different financial aid formulas.

Most importantly your home equity if significant can/should be an important consideration in your college selection process.

Understanding the calculation methods can even potentially save you thousands of  dollars especially with the 100% financial need met schools. But with the right mindset and the relevant knowledge, understanding it won’t be too difficult of a task.

Home Equity is not assessed with the Federal Methodology (FAFSA), however it does contribute to your expected family contribution (EFC) with the CSS PROFILE  and Consensus 568 schools (assessment maximum 1.2 times income).

There are 260+ schools mostly private (5 state schools) that require the CSS PROFILE.  And there are Consensus 568 schools (25) that use the FAFSA and the CSS PROFILE but make adjustments from the typical CSS Profile rules in addition to how they provide financial aid.

How Does the Calculation for Home Equity Work?

There are two components to the calculation.

  1. A percentage of the family’s total income (“income”) referred to as the “assessment rate”.
  2. A possible “cap” (ceiling amount) at which point the total amount added to the asset assessment rate is frozen without any increase regardless of the net equity amount and/or the income amount.

Assessment Rate and Cap Examples

Both the CSS PROFILE and the Consensus 568 assess house equity as an asset at 5% but there are caps (“aggregate limit”) which are a multiple of income.

Please note some  school do not have a cap so 100% of your home equity is  assessed. If you attend one of these schools  and are unhappy with your financial aid award you can consider a financial aid appeal.

Consensus caps the assessment total counted asset value at  1.2  times income.

Home equity $300,000 and income is $100,000, the assessment would be $120,000 ($300,000 times 5% equals $150,000 but the cap is $100,000 income times 1.2% equals $120,000.

CSS PROFILE schools caps differ using a multiple of  income at  different levels, but in most cases it is not more than 2.5-4 times AGI but there are schools that assess 100% of income.

For example, family house equity is $300,000, respective schools cap is 2 times income, and income  is $100,000. Therefore, the assessment rate is $200,000 (2 times income is the cap, 2 times income of $100,000 equals $200,000).

CSS Profile School Assessment Rates

Now that you understand the fundamentals of home equity calculation for financial aid, your next step should be to understand how the schools that interest your family assesses home equity. Otherwise, you are making a  large financial aid mistake in estimating the cost of many schools that assess home equity.

Here are some samples of CSS PROFILE Schools assessment rates. Please note that these are subject to change and are provided merely as an example of how home equity assessment rates work in the financial aid formula.