FAFSA vs Profile

The FAFSA gets a lot of attention right around now, but it’s only one of two financial aid forms. The other is the CSS Profile, used primarily by private colleges and universities.

The Profile differs from the FAFSA in several major respects:

• It looks at a broader range of assets in its calculations. This includes home equity, all 529 accounts for which the student is the beneficiary (including non-parent-owned accounts), small businesses (the FAFSA excludes parent-owned businesses with less than 100 employees) and cash-value insurance policies, for example. However, the Profile also has additional exemptions against assets including an emergency fund, projected medical expenses and college savings and private school tuition.
• The Profile includes a mandatory student contribution from income, basically assuming that the student can earn money towards college through a summer job or employment during the school year. This typically ranges from $3,000-$6,000.
• Colleges can include additional questions. These might include “Is anyone else saving for college on your behalf?” or questions about the family’s cars or other personal property.
• The FAFSA’s calculation of EFC is called Federal Methodology. The CSS Profile’s calculation is called Institutional Methodology; a subset of Profile schools have come up with a third calculation called Consensus Methodology. Institutional Methodology is slightly misleading insofar as Profile schools can add their own questions, use their own formula for calculating the value of home equity, factor in regional cost of living differences, and otherwise make tweaks as long as they use a consistent methodology for all students. This is because the primary use of the Profile is to award institutional aid. Students still need to complete the FAFSA to be considered for federal aid.
• Students whose parents are divorced will only need to have their custodial parent complete the FAFSA; Profile schools will require both parents to complete it.
• Where the FAFSA is free, the Profile charges $25 for the first school and $16 for each additional school. Many schools offer fee waivers, so check if you’re eligible before paying to file it.

For many families, the home equity piece is the biggest difference between the two formulas especially given growth in home values since the Great Recession. Schools have come to a variety of conclusions about the value of home equity in the formula, with many, including Stanford, Harvard, Yale, and Princeton, no longer including home equity in their financial aid calculations. Others, including the Consensus Methodology schools, cap home equity at 120% of the parents’ income.

Two important points about home equity on the Profile:

• Regardless of the schools’ treatment of home equity, you will be asked for it when completing the Profile.
• Schools do not use Zillow or MLS listings to determine home value. Instead, they use the Federal Housing Multiplier Index which “projects what a given house purchased at a point in time would be worth today if it appreciated at the average appreciation rate of all homes in the area.” And of course, the number is net of mortgage debt.

Last point about the Profile: Many people think of it as the “private school FAFSA.” However, it’s only used by about 200 private schools, compared with more than 6,000 who use the FAFSA. So before investing too much time in the Profile, make sure the schools to which you’re applying actually require it.