Both my kids got excess funds from FA paid to the most semesters. One had full financial aid to cover tuition/fees/meals, but took the subsidized loans to pay for her rent. The other didn’t get much but did get a few hundred dollars she used for books, room and board. It was NEVER in her account when it came time to file a new FAFSA.
The one that took the loans didn’t use the money. She banked it to use if needed (wasn’t) so she used it for her initial expenses when she graduated (car, rent, deposits). Some of it is still in her savings account.
If you spend it all, it’s not there to report. I don’t see the problem. You report what is in your account on the day your file FAFSA. It is isn’t there, it isnt there.
If you say have $5000 in excess funds and co-mingle it with $2000 you already had in the account, you can exclude $5000 of that when reporting. If you spent $5000 and still have $2000 left, you can claim that it is all FA money (you spent $2000 of saved money and $3000 of FA money). If on the day you file FAFSA you have $4000 in that same account, only $2000 is FA money. The other $2000 is ‘replaced’ money and you can’t claim it was from the original $5000 FA money. That’s what I meant by ‘replaced.’
My daughter wasn’t asked how much money was FA money she had saved. On the FAFSA form, it asked for amount of cash assets. She subtracted out the FA money and just entered the balance. She was never asked to provide bank statements or prove the balance was from FA. It’s an honesty thing. She was never question. Can I tell you that no student EVER hasn’t been asked to verify the source of their funds? No, but it isn’t asked on the FAFSA.