Stanford Removed Home Equity Value from Financial Aid Calculation
By Joe Messinger, CFP®
May 31, 2019
How much can a student and their family afford to pay for college? Colleges use a few different formulas to try and estimate that amount. (You can find a detailed look at the comparison between the two here.) Most colleges use the Free Application for Federal Student Aid or FAFSA which looks at the amount of money students and families have saved. Colleges expect the family to contribute a certain percentage of that amount as their Expected Family Contribution or EFC. Other schools like Stanford use the CSS PROFILE™ for their calculation. The CSS PROFILE attempts a more complete picture of financial health by including expenses and home equity in their calculation. In December 2018, Stanford removed home equity value from their EFC calculation joining Harvard and MIT in this policy.
Home prices across the country and especially in certain areas have risen. Those higher home values might not accurately show a family’s actual wealth. Many middle income families are house rich but cash poor.
What is the CSS PROFILE?
We have touched on this topic before. Nearly 400 colleges and universities utilize the College Board’s CSS PROFILE to collect financial information used to award aid. Unlike the FAFSA which is free, submitting the CSS PROFILE does require a fee per institution. The CSS PROFILE also will take more time to complete and require more detailed information.
Be aware that they do not collect information on behalf of the Federal government. If you will need federal loans, you will still need to complete the FAFSA.
Why all the extra financial information?
Schools like Stanford will meet 100% of a family’s need. Not all schools will do that. As a result, they want to attempt to create a more complete financial picture of a family outside of simply their earnings and savings.
If you look at Stanford’s “Parent Contribution” page, you’ll see they are taking into account:
- “living expenses (based on household size)”
- “federal and state taxes”
- “unusually high medical expenses”
- “college costs (undergraduate) for siblings”
- “private school tuition and college savings for younger siblings”
Like the FAFSA, they do take into account a family’s savings and investments, and both exclude retirement savings. Unlike some other CSS PROFILE schools, they no longer include home equity in the assets.
Let’s be honest. Stanford is expensive. “Undergraduate tuition for 2019-20 will be $52,857, representing an increase of 4.25 percent. The total charges for full-tuition-paying families will be $69,962, which includes $16,433 for room and board and $672 for a mandatory health fee.” However, they are generous with aid thanks to their large endowment.
The details of their aid award levels can be found on this page. You can read about the different family income levels that might expect to receive aid. Note, that even families with income up to $225,000 may qualify for some assistance based on their circumstances like having more than one student in college. So they encourage all families to apply. You never know.
We always advise families to not write off a school simply based on the sticker price. Stanford is one example of a school that if your student can get in it may be more affordable than you expect.