<p>Understand that FA office look at money in different pots and “tax” them differently based on which pot (or unfortunately, potS) it comes from. From savingforcollege.com:</p>
<p>20% of a student’s assets (money, investments, business interests, and real estate)
•50% of a student’s income (after certain allowances)
•2.6%- 5.6% of a parent’s assets (money, investments, certain business interests, and real estate, based on a sliding income scale and after certain allowances)
• 22%-47% of a parent’s income (based on a sliding income scale and after certain allowances) </p>
<p>Thus, your son’s income will get tapped at 50% after the allowance and then if he saves it in his name at the time the FAFSA is completed, it will get tapped again for another 20%.</p>
<p>I like the idea of putting it into a 529 or Coverdell ESA. Another possiblity to consider is putting it into a Roth IRA. He won’t be able to touch the IRA money for the first five years that the account is open, but it will prevent the FA office from including it in their calculations.</p>