Bank account money consisting only of Financial Aid refund.

Paying for College
1

<p>So right now, I have about $3000 in my savings/checkings account purely from Financial Aid refund. My parents stopped giving me a small allowance every week after high school ended (which was only $10 a week, which is gone by now - 3 years ago), except for the occasional birthday money or Chinese New Year money. But it comes out to be less than $200. So that is what I usually put on FAFSA information.</p>

<p>I use that money wisely, so that is why I have a lot left over. I used it for books, laptop for school, internet bills/other obligated bills, food/necessities. </p>

<p>I currently got my first part-time job consisting of 25 hours per week which I will probably keep for awhile. Hours will be decreased when summer is over and I start school again. I will make less than $6000 this year so it will be shielded from taking 50% of my income.</p>

<p>I normally transfer $1000 or $500 to my dad every so often (for him to borrow, he doesn’t have enough money in his checking/savings) or to my mom (same reason, borrow to help pay off bills). They usually pay me back in cash each month or when they earn the money. When I have a large amount, I would deposit back to bank.</p>

<p>Now that I have a job, if I transfer the money I make to my parents each couple of months, will that seem suspicious when I report my assets? The thing is, I don’t use my debit card that often because I usually use my dad’s credit card (he tells me to, so he can get interest back since he pay everything back each month). Everything from buying contacts/glasses, internet, data plan, and maybe gas would be on his credit card. Then I would transfer an estimate of how much I owe him to his checking account. </p>

<p>So by 2014, I might still have the same $3000 + $1000 more from Fall 2013 FA refund. Maybe a little extra more of $500 from the job I make, assuming that I transferred a lot of my money to my parents to help pay for bills or something.</p>

<p>I know that student assets will have 20% taken off compared to parent’s 5.6%? Plus parents can have their assets shielded under a certain amount. So I am taking that into consideration, but my main purpose is that I usually transfer money to my parents.</p>

<p>I never had to verify my bank information before, but just in case it happens, when I deposit my paychecks into the bank and let it pile up every month and I transfer maybe 80% of it to my parents regularly, by 2014, I would just have FA money and 20% of paycheck (or less if I use my debit card). I can report that my assets are $500 (unless more) correct?</p>

<p>How would the people that check it know that the $4000 in my bank is FA money. We are not suppose to report that as assets. But I could have used the FA money instead of paycheck money to give to my parents. </p>

<p>Sorry for this long story. I just want to prepare myself before my last FAFSA application. If I didn’t have a job, then I could confidently say that my assets are close to $200 or even $0 if I spend it all. But since I now have a paycheck, it worries me that I have to have a big savings now and if I need bank verifications, they might see no debit purchases but just transfers of $1000 or $500 to my dad or to withdrawals in cash. If this is confusing, just tell me! Thanks.</p>

2

<p>The part that is confusing to me is how you have differentiated your “FA money” from your personal savings. It seems to me that these would be the same, since it is cash that belongs to your regardless of whether it comes from your job or from a refund from your college.</p>

<p>As to your other point, there is nothing wrong with paying for your own expenses from your earnings, regardless of how this payment is accomplished. In your case, your father pays the actual bill and you reimburse him. If he at some point chooses to give you a gift of cash then that is simply a father’s choice - even if the amount of cash happens to be similar to the amount of your bills and even if the timing of his gift is shortly after filing your FA paperwork.</p>

3

<p>The only time that you have to write down how much you have in assets is as of the date you fill out your FAFSA/ Profile. So either make sure you have zero in your accounts–that you have given the funds to your parents as repayment for your expenses on that day, or that any money you have sitting there on that day is VERY CLEARLY financial aid money. Too many transactions, and if your are verified, they can just throw their hands up and say, “nope” which means a huge hassle, less aid, and if you appeal the process, a major ordeal. You want to make it clear and easy. If you are transferring money in and out, I don’t think you are going to have a clear case if you are audited whatever the explanation. You need to show the financial aid money going in and sitting there; once it is gone and is back, it’s not the same money any more. You are asking for trouble if you are doing this, and “loans” to your parents like that are not likely to cut it. Otherwise kids can just take out money from their accounts, “lend” it to their parents for the day that FAFSA is filed so they have a zero balance, and then get it paid back the next day. Nope. That’s tantamount to hiding the money for a day to escape FAFSA accounting.</p>

<p>What IS allowable is if you set up an account with a parent, a joint one, with parent’s name and SSN on it first to stash the money there, and it gets reported as a parental asset which is subject to an allowance and is only hit at 5.6% instead of the whopping 20% that student assets are with no allowance on the EFC. But you really should not be doing a lot of switching around and playing around with this money. If you are audited, and it isn’t clear that all is on the up and up, the federal faucets will be turned off, and it can take a long time for things to get cleared up, even if it is all legit and eventually is proven. It’s easy to justify these things in your own mind, but if you have to write it out and someone has to follow a convoluted trail, they are are likely to say, “forget it” and just refuse to let it pass.</p>

4

<p>It doesn’t matter if it’s FA money or not in your savings. It would count the day you file for FAFSA.</p>

<p>You can avoid this by spending the money on necessary expenses, car repair, whatever. </p>

<p>I think FAFSA should change with this rule. Every student should be allowed to have - say - up to $5000 in savings and be exempt from affecting EFC.</p>

5

<p>Is it possible to open another savings account and get the FA refund put directly into the savings account, and then have the job money go in a direct deposit to you checkings account? Transfer money out of the savings account as needed to pay for school stuff, but don’t transfer money in from the checkings account. That way, the savings account money is very clearly the money left from the school refund, and nothing else goes in it.</p>

<p>m2ck-- FA money doesn’t count as a part of the student’s assets, I believe. The instructions for question 40 state

.</p>

6

<p>DON’T transfer money out of your account to your parents for the purpose of hiding assets from financial aid – you could get in big trouble that way.</p>

<p>However, it is OK for you to have a joint account with a parent tied to their Social Security number, and given the pattern you have already established of you lending money to your Dad and him allowing you the use of his credit card for all expenses – I think it would make a lot of sense to have that type of account. I have had a similar shared account with my daughter for years – it happens to be under her SS # rather than mine – but we use it for transferring money between us. My d. is 25 years old and self-supporting, and also has a separate account of her own where her paycheck is deposited.</p>

<p>The difference is the purpose of the account: trying to hide assets from financial aid is risky, and the transfers in and out make everything very confusing. </p>

<p>If you had that separate checking account, you could just keep the same deal with your dad and it would probably be easier and more convenient for everyone in your family. At first from your post I questioned the wisdom of your lending money to your parents, but when I saw that you are using your dad’s credit card it looks like a fair exchange. It looks like you have a strong trusting relationship with your parents and that they have a history of paying you back when you advance the money.</p>

<p>I also agree with purpleacorn about the idea of a separate account for your financial aid refund.</p>

<p>You can get free checking accounts & even earn interest banking online - plus it is very easy to set up accounts that way.</p>

7

<p>I agree, Mom2collegekids, that there should be some exemption in the savings account for students, so that every friggin’ cent does not go directly towards the 20% for EFC. However, there is the exception that money from financial aid is exempt. But it has to be clear that those are financial aid funds. That’s because some kids will get an award that is sitting in their accounts awaiting disbursement, say for room and board and they are living off campus, and that specifically is not to be included on the FAFSA. So if you get an award, and you deposit it into an account, and don’t touch it, you can show clearly that it is the money from the FA disbursement sitting there. But if you are moving it around and replacing it, you can’t say that. And that is what the OP has been doing. During an audit, they are not going to be interested in explanations. They want to see the fin aid amount in there, and staying in there without being used and replaced. Then, it is not reportable. </p>

<p>Example: Student gets $5K over tution in fin aid. He gets it as a check from the fin aid office and he deposits it into his account. He is also working a job, so he can meet expenses that way. If he gets that $5K, for second term, say on Jan 10th, and hasn’t touched it, and is filling out FAFSA on February 15th for the next year, he can exempt that entire $5K, as long as he has put $5K into that account, and from that instant on, not gone below $5K. He can claim that the Fin Aid amount is still there awaiting use. But if he deposited $5K in the account, spent $3K of it, lent some of it to mom and dad, and then got the money back, or got a pay check, so he now has $5K or whatever amount in that account, uh uhn. Nope. Can’t exempt it. Once you spend it, it cannot be put back in there and be claimed as part of the fin aid award. </p>

<p>To keep it simple, an adjunct savings account is often opened, and only fin aid money is put in there. This works well for depositing work study checks. So, that savings account balance does not have to be reported on FAFSA if the only funds deposited are fin aid. You can draw on the money, transferring it to checking or whatever, but the only thing that goes in is fin aid money, so any balance in there is purely left over fin aid proceeds. The instant you put outside money in there, however, you do compromise the set up, because all such deposits have to be carefuly tracked and if there is too much traffic there, forget it.</p>

<p>The problem is that it is so rare anyone goes over this with the kids, so it’s usually one hot mess. When an audit occurs, some kids come out badly. It takes an intstant to get a snap shot of the FAFSA date account balances and if not reported, a request for the monthly statements would be made, and too much going on will kill the argument that all that is sitting there if fin aid. The way it would be handled is that the Fin aid exemption would be the lowest amount of your account balances from the day your got the fin aid money to the day of the FAFSA filing. You can’t be mixing other money and then claiming an exemption.</p>

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<p>*m2ck-- FA money doesn’t count as a part of the student’s assets, I believe. The instructions for question 40 state
Quote:
Do not include student financial aid
*</p>

<p>Oh good. For some reason I thought that rule was only for student income.</p>

9

<p>If the money is taken out of the account and “replaced” with funds from another source, it is no longer financial aid money. It takes on the character of whatever the replacement source is. So if there was $3000 in the account from FA and the OP lent $1000 to Dad, and then Dad pays her back – she would then have $2000 FA money in the account and $1000 “from Dad” money. </p>

<p>The existing money is probably already diluted by transfers in and out and should be viewed as OP’s money, not FA-source. So the advice about the separate account should apply to next year’s allotment. So, if FA gives her a refund in September, then that money will go into a separate account. OP should leave it there, while paying all her personal expenses from the account where she is depositing her earnings. She would only transfer the FA money into the personal account at the point where she needs – that is, when her personal funds (sourced from earnings or payments from her parents) are nearly exhausted.</p>

10

<p>Thank you for all the helpful responses. My main concern is just the transferring of my paycheck money to my parents every so often. But I can start by keeping my FA refund in the savings account and paycheck money to my checking until I figure out joint accounts with my parents.</p>

<p>The only problem is that I recently (last week) just deposited back the $1500 my mom owed me (first time depositing money from what I transferred out). $3000 is in my savings account, the only way I can see myself making sure that the $1500 is handled properly is to switch it into Checking and try to spend it all on expenses or putting phones bills/house bills towards my account instead of my dad’s.</p>

<p>–> So all my paycheck money is in my checking account, not regarding Financial Aid, my original question was suppose to be, if I transfer maybe about 50% of my paycheck to my parents, and then spend 25% of my paycheck on food/clothing, and 25% left on checking, would the transferring of $400 each month (assuming it’s a $800 paycheck) be suspicious like I’m trying to move my assets? That’s my main concern. It is not like I’m transferring a large amount before FAFSA day to get a lower EFC. It’s necessary money payments that is periodically transferred in medium-ish amounts to my parents. How can they tell between FA refund and personal savings was just an added bonus to my question. But I have that figured out now.</p>

<p>@calmom Letting my parents borrow money from me is no problem at all. We trust each other with this stuff. It just might take some time to pay me back since they have bills to pay. They don’t make that much. My sister and I will happily contribute with the house bills after we graduate college and get a stable job. But for now, the money we are making is to help us with our own payments like cars, our personal bills, etc. If I have extra that I am not using for now (since I was at CC, now I’m going to CSU in fall), why not lend it to my parents so they don’t have to take out a loan or pay with credit cards while the interest rates build up.</p>

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<p>Just keep in mind that once you have lent money to your parents, it no longer can be called financial aid money. It’s your business to use the financial aid money however you want – it is supposed to cover your living expenses, but no one is going to audit how you spend it. So you are free to give or loan it to anyone. But if you were to get $3000 from financial aid on Monday, lend it to your Dad on Tuesday, and then he paid you back on Wednesday – and you put the money back in the financial aid account: it’s not “financial aid” $$ any more. You’ve converted it from “financial aid” until “loan repayment”.</p>

<p>It’s possible that someone would offer you a differing opinion, but if it ever came up then you would have the burden of tracing everything.</p>

<p>The $400 a month to your parents isn’t a problem. You are not forbidden from giving away or transferring money to others as long as the transfer is genuine – that mean, if you really are giving it or lending it to someone else for their use. (It would be a problem if a financial aid recipient transferred all their money for their parents to “hold” for them)</p>

<p>In any case, you don’t have to report anything until you fill out the FAFSA for next year. So other than setting up a separate account down the line to make it easier to isolate the financial aid funds, there’s nothing to worry about right now.</p>

12

<p>OP, Calmom has explained it in a nutshell. Once you take out the money, you can’t replace it and call it financial aid money. You get $5000 in financial aid money, and you lend mom $3000, and she returns it, you only have $2000 that you can call fin aid. That’s the gist of it. </p>

<p>You are not permitted to make a transaction specifically to avoid getting the money counted for FAFSA purposes. For example, if you have $1000 or whatever amount of money, giving it to Mom or anyone to “hold” the day you file FAFSA to specifically avoid reporting it is not allowed, But you are permitted to give, lend, reimburse expenses or do anything with your money as you please. Yes, intent counts, and it does in all areas of the law including tax law, especially in gray areas that are often not monitored.</p>