Lately, my mom has been telling me to keep as little money in my bank account as possible. She says that when I transfer to university next year, they will check into my bank account to see how much money I have. If I have too much, they will cut my financial aid and make me pay for tuition. She wants me keep no more than $3000 in my account.
Is it true that I need to keep my money under $3000? Are they really going to check and punish me if I have too much? I am going to see my counselor in August, so I will be asking her about this, too.
You’re required to report cash assets, too. There’s a difference between hiding assets, which is bad, and spending them down (or transferring those to the parent to put in a 529 account), which is completely fine, financial-aid-application-wise.
Will you be attending a college that meets full need for all accepted students?
The FAFSA EFC uses 20% of student assets (doesn’t matter where the money is located if you haven’t spent it or given it away). So for $3000 in savings, your EFC per FAFSA would be $600 higher than without the savings.
Depending on the policy of the college, that might or might not change your actual net cost to attend…at all. Depends on the college.
PLUS…the EFC is largely dependent on parent income and assets. So…that needs to be considered first and foremost.
Do your dad and mom plan to quit their jobs…like now…so that you will get more need based financial aid?
So…if you have $3000 in the bank…and your school charges you $600 more in costs…that still leaves you with $2400. I think you should be proud that you can contribute to your college costs.
Now…having said all of that…if this money in the bank will cause you to be over an EFC threshold for Pell eligibility or school based need based aid…then all you need to do is use the money to buy things you will need for college before the date you file your FAFSA.
But really…I would be running the net price calculators with…and without…that $3000 to see IF there is even a difference in aid. There might not be.
I always thought it was 50%. Has it changed or was I confused?
Don’t know why the mom is saying $3k. There is no magic amount. Even 1000 will hurt FA if you qualify UNLESS your family’s income is low enough that assets aren’t considered.
The fafsa formula uses 50% of student income after the income protection allowance, state and other tax allowance, social security tax allowance and the amount of fed taxes paid; 20% of student assets.
I don’t know. She said she will be “hanging on to it” for me. No clue, but she wants me to get the money out quick. My dad doesn’t work, he’s retired. I have no idea what the 20% assets even mean.
But overall, it will be troublesome if I have too much cash in my bank account, right?
If she “hangs on to it for you”, it’s still your asset and needs to be reported as such. If she wants you to be fraudulent when filing finaid forms, then that’s an issue for you and her to discuss. The 20% of assets means that if you have $3k, 20% or $600 will be added to your fafsa EFC due to assets.
ETA: For fafsa, depending on your family’s income, you may qualify either for the simplified formula or the auto 0 efc. That takes an income of less than $50k or $24k respectively plus one other requirement from the link I’ve posted. If you qualify for one or the other, neither your parents nor your assets are counted for federal aid.
You can give the money to your mom for her to pay your expenses. Or you can have the money put into a 529 acct. That is probably best. Then it’s counted as a parent asset.
You mom is telling you to spend/move/hide your money so that you can get my money (and every other person, who pays taxes, alumni who give to their schools, or pays full freight for their kids)?
Seriously, where do you think the money for financial aid comes from? It is because the generosity of other people's parents, whether it is federal state grants or institutional funds
There are only a small number of the 4000 colleges in the country that meet 100% need.
You will need the money that you are trying to stash, for college; whether to help your parents pay their EFC, purchase books, pay for your health insurance (if your parents don’t have adequate health insurance).
Unless you are sitting on a whole lot of money, I am willing to bet money that the amount of money you have is not going to make an appreciable difference in the amount of other people’s money that you will receive.
Instead sit down, talk with your parents, who are first in line to pay for your education to find out how much they are realistically willing to pay or borrow for you to go to school.
Then sit with your mom and your list of schools and run your numbers through the school’s net price calculator to see if these schools are an affordable option for you and your family.
We hear this question a lot here at CC, but like others said it might not make a big difference or none at all how much money you have saved in the bank or elsewhere.
If your family is low income then you might qualify for auto 0 EFC or simplified needs test like annoyingdad mentioned and then your assets won’t be taken into account.
If your family income is too high to qualify for Pell then your money would simply add 20% to the EFC.
So you need to figure out if it will matter for the first year of filing FAFSA. Like thumper1 suggested run net price calculators with and without your savings and pay attention to the bottom line, does it change, how much?
Also see if a Pell grant is mentioned and how much. I’m saying for first year FAFSA because in subsequent years you can spend all your money on tuition and other billed expenses from the school before you file the new FAFSA.
If your money makes a big difference in aid then you might decide to put it in a 529 account or if the money was earned from a job then you could put it in a Roth IRA.
But first figure out if it matters.
Does your mom think you would be low enough income to qualify for aid? That is the first hurdle, then assets come into play.
*Intentionally providing false and misleading information on the FAFSA is fraud. The penalties for lying on the FAFSA include, but are not limited to, fines of up to $20,000 and up to five years of jail time, in addition to repaying the financial aid received by the student.