How Do Your Investments and Assets Affect Your Child’s College Financial Aid?

How Do Your Investments and Assets Affect Your Child’s College Financial Aid?

What assets are considered in the FAFSA (Free Application for Federal Student Aid)?

What is it? This FAFSA is used to determine if a student qualifies for federal or state financial money as well as if a student qualifies for tuition help from the college itself.

The FAFSA form is not easy to complete especially the first time.

What you do NOT have to include:

  • the equity in your main home
  • your qualified retirement plans
  • your annuities (even if they are after tax, non-qualified type annuities)
  • cash value life insurance

What is considered?

  • assets such as non-qualified, taxable type accounts

                                        Such as:  CD’s, savings, money market, equity in other real estate than            
                                                         your primary residence, mutual funds, bonds or stock                             
                                                         accounts, any college saving accounts, as well as any Uniform
                                                         Gift/Transfer to Minor accounts.

The amount of assets considered under the child’s name is a greater percentage than that under the parent’s name. The parent’s age is also considered. The older the parent is, the less assets considered in the financial aid formula. The parental income is also considered.

Saving for future college expenses is a good idea as part of your budget and overall financial planning.

How can we make the money go further?

In addition to saving for college, you can discuss other options that may save money down the road such as having your child stay at home the first year or two and commute to a local college to get the core or basic classes. Some high schools offer dual enrollment where your high school student can attend classes at a local college to obtain some college credit.

A grandparent can write a check payable to the college without any “gifting” rules limit. Some even use a ROTH IRA as a part of the college funding plan.

Discuss with your Advisors:

Consult with your CPA and Financial Advisor well ahead of time to implement the best solutions for your concerns, issues, goals and dreams.

 

Disclosure: All information is based on current laws and is believed to be accurate. Consult with your CPA, tax advisor. Every person and situation is different and may require detailed analysis before making any decisions or taking action.

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