Stanford announced yesterday a major change in how it will take into account parents’ equity in their homes in determining student eligibility for financial aid:
Stanford will reduce the amount of home equity assessed in the calculation of a parental contribution by capping the amount of equity considered at 1.5 times the family income [rather than 2 times under the prior policy]. The policy is expected to reduce parent contributions for families with significant home equity by, on average, $2,000. An allowance also will be made for renters
For example, consider a family of four from California with annual income of $103,000. They purchased their home 15 years ago and have accumulated $480,000 in equity. Under the old policies, the parents would have been expected to contribute more than $25,000, and the student would have been expected to borrow $3,500 annually. A scholarship of $14,000 would have been granted to make up the shortfall. When the new policies are fully implemented next fall, the expected parent contribution will be reduced to $22,000, and the amount the student is expected to borrow will be reduced to $2,000. To make up the difference, the student’s scholarship will be increased to $19,000.
For commentary on how other elite colleges are reacting to Stanford’s move, see:
