From a financial aid director: How retirement funds, home equity, and cars matter

“If you have a 2020 BMW and $10,000 a year in income, we’re going to wonder what else is going on behind the scenes,” says Dickinson College’s Director of Financial Aid, Leah Young. This week, our money expert answers readers’ burning questions: How do assets work for and against your child’s aid award? How do schools judge retirement funds, home equity, and even the cars in your garage? Leah busts FAFSA myths, warns readers of the biggest aid misconceptions, and reveals the little-known ways colleges determine aid, especially in Covid times.

Leah, can you tell us about your experience working in college financial aid?

I’m the Director of Financial Aid at Dickinson College. I oversee the department and also have a caseload of students and families that I work with on a daily basis to help them navigate the application process and to help answer questions. Dickinson College is a small liberal arts college, so typically with those size colleges, you get a lot of personal attention.

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How do you prioritize all the different aid applications you receive? There’s FAFSA, CSS Profile, and some schools even have an institution-specific aid form.

For Dickinson in particular, the CSS Profile holds more weight, because it’s more complete and more complex. This can work for or against a student. For those that live in high-cost cities like San Francisco or New York City, we take into account the cost of living. The FAFSA, no matter what city or even part of the world that you live in, is going to give you the same Estimated Family Contribution if your earnings are the same, despite what your costs are. In addition, CSS Profile takes a more complete look at assets.

What’s an example of the CSS Profile taking a more “complete” look at assets?

Some folks in financial aid like to refer to folks as “Pellionaires.” There are some students who will qualify for federal Pell Grants but actually have a ton of assets because their parents’ tax returns reflect business losses or things like that that take it down to where it looks like they should be receiving full aid. When we collect more information on the profile, we can actually see those assets that the FAFSA ignores.

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And when you find those additional assets that FAFSA ignores, does it disqualify the applicant from the Pell Grant?

It doesn’t. The FAFSA is absolutely 100% the most important thing for federal eligibility of subsidized and unsubsidized loans and Pell Grants and work/study. If they qualify on the FAFSA — we do verify all first-year students; we collect the tax returns and W-2s — even if they have all those assets, they’re still eligible for the Pell Grant. The FAFSA doesn’t look at those particular assets.

How do institutions themselves award aid differently from the federal government?

Need-based aid is limited. There are very few schools that have unlimited endowments and they can’t change the federal methodology, but in the institutional methodology, they want to give that money to their neediest students. Looking at a student who has very little income and almost no assets versus one appears on paper to have no income but actually has income that’s being paid in other ways through business channels and lots of assets, we’re going to want to spend that limited need dollars on the student with the true need.

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Which specific kinds of assets actually come into review for financial aid?

For example, the CSS Profile looks at home equity: how much your house is worth minus how much you owe on it. The formula of how you analyze that can be changed from school to school. For instance, we cap that at two times the annual income.

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