As part of ongoing efforts to review its financial policies, the College has lowered the cap on the amount of home equity it considers when creating financial aid packages. Provost and Treasurer Bill Lenhart announced the reduction in an all-campus e-mail sent yesterday, noting that financial aid packages for the 2008-2009 academic year will now cap their consideration of home equity at 1.2 times parent income, down from the current level of two.
The lowered home equity cap reflects suggestions from financial aid directors at peer institutions with need-blind admissions. The cap will affect around 320 families and cost the College an estimated $800,000. It will take effect in the coming academic year for students in all classes.
Home equity – the current market value of a house minus the principal mortgage and other loans borrowed against the home – is currently counted in each family’s assets when calculating financial aid. The parent contribution is typically comprised of three to five percent of the equity.
Lenhart explained that until two years ago, no limits existed on the amount of home equity considered. The initial cap was set at 2.4 times parental income, though financial aid officers used discretion to lower the amount in certain circumstances. Officers will continue adjusting levels accordingly, Lenhart said.
Home equity contributions for some families may be lower, particularly for those who depend on home equity for retirement saving or families that own property in areas with rising market values.
In the e-mail, Lenhart noted that there may be more changes for students on financial aid in the future. “Williams is fortunate to have the resources to consider further expansion of financial aid and to have made this particular move,” Lenhart wrote, “It will help a significant number of Williams families and further our goal of recruiting each year a talented and diverse entering class.”