Does money stored in the bank matter?

<p>Say for example that my parents makes 50k a year together at this moment. Over the years they stored a grand total of 150k in the bank.
Would that amount in the bank lower the amount of financial aid I would be given?
Like would a family who makes the same amount as my family get more financial aid if they only have like 50k stored in the bank?</p>

<p>Yes. Assets, including money in the bank, must be reported and are taken into account when awarding financial aid. </p>

<p>On FAFSA there are 2 major assets that do *not *have to be reported: the primary home and savings in retirements accounts, such as IRAs and 401ks (must be actual retirement accounts, not just money “pegged” for retirement). All other assets such as money in the bank, stocks and shares, other real estate, must be reported. Parents have a certain amount of asset protection based on the number of parents and the age of the older parent. Assets over that amount have an impact of 5.6% on the EFC. Students have no asset protection and their assets have a 20% impact on the EFC.</p>

<p>There are supposed to be some changes coming up about assets on FAFSA. Not sure if that is the upcoming year, or if it will be in a subsequent year.</p>

<p>Is is also not possible to withdraw all the money at once?</p>

<p>swimcatmom where do you find the formula re: “Parents have a certain amount of asset protection based on the number of parents and the age of the older parent. Assets over that amount have an impact of 5.6% on the EFC.” ?



<p>What is your question? Anyone can withdraw any amount they choose from any account at any time. If it is a regular savings you just take the money out. If it’s a CD, you might have to pay an early withdrawal penalty. If it’s in a retirement account you will have to pay a penalty and taxes if you are not over a certain age (and the contributions were pretax).</p>

<p>If your parents have $150,000 in the bank there will be a certain amount of asset protection. Beyond that, Swimcatsmom is correct…about 5.6% assessment per year for the FAFSA EFC calculation.</p>

<p>But really that isn’t a lot…can’t they use that to help you with college? It would be about $8400 (and that is assuming NO asset protection). They would leave $141600 still IN their accounts. The accounts probably are earning a little interest so it would likely be more than than in the end.</p>

<p>So…what is your question?</p>

<p>The asset protection allowance for 2 parents with the oldest being 50 is $48,800. If the oldest parent is 51, the asset protection allowance is $50,000. For other values, see chart A5 in this document:</p>

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<p>You can do whatever you want with your money, but if it was withdrawn from some investment account and is now sitting in cash or a checking account, it’s still reportable for FAFSA.</p>

<p>You might confirm with them as to whether that money is in a retirement account (401k/IRA/etc), that would not count as an available asset.</p>

<p>They could use some of the money to pay down debt, as debt is not considered as part of the formula for aid. You should run their numbers and get an idea if there would be any grant aid anyway, before choosing to give up that liquidity</p>

<p>Also if your family total income is below $50,000 and you qualify for free lunch or some other government subsidy (e.g. food stamps)…or have that income or less and filed a 1040A or 1040EZ form, it is possible your parent assets would not be counted in the FAFSA formula at all.</p>


If they stick it under the mattress they are still supposed to report it. It is still an asset. They could withdraw it all and blow it all on nice cars, gucci purses, and champagne. But that would be stupid. They would be broke, out $150,000, and it would not net you and additional $150,000 in FA.</p>

<p>Yes, it is counted, but in most cases it would amount to be about $6000 a year. Most of the impact is on your family’s 2010 income. If they can pay off a loan with the money or tuck it into a retirement plan or pay for something that needs to be paid, it could make a difference in your aid. </p>

<p>But this is really a tricky situation. You need to sit and look at what the difference is going to be. You are close enough to possibly qualify for some PELL money, but really what difference is this going to make? College costs are not the “be all , end all” of financial decisions, and to look at them in a vacuum could be a big mistake. First of all, look and see what difference it makes to have that money pay off, buy or get tucked into qualified plan vehicles. Then also look at the implications that doing any of these things do for your parent’s financial positiion and options. Is the money just sitting there for no real reason, or is there good reason to have that amount liquid and available? It is tantamount to cutting off ones nose to spite one’s face to tuck away or spend away that money and end up in more problems than a few thousand off college tuitions is going to net in terms of savings. It all depends on what the schools you are considering are going to be offering you. It is not a simple decision at all.</p>