<p>Our daughter is a HS senior and we are trying to figure out if colleges treat some assets differently than others for financial aid purposes. My husband is self-employed and has some money in a business account. Would this account be treated the same as our personal savings? If he took the money out and put it in a 401k, would the deposit be construed to be 2011 income? Thanks all for your comments.</p>
<p>The principle pretty much is that any moving around of assets you do in your basis year (2011 for 2012-13 aid decisions) is not going to help.</p>
<p>The good news is that for FAFSA-only schools, as long as your husband employs less than 100 people, the business assets are disregarded. (There are adjustments to income for business owners and self-employed, however.)</p>
<p>HOWEVER, and it’s a BIG HOWEVER, at CSS PROFILE schools, they can, and often do, look at some of the assets of a small business as available for supporting a kid in college. Since every CSS PROFILE school uses its own, “institutional” methodology, their policies will vary.</p>
<p>See <a href=“Your Guide for College Financial Aid - Finaid”>Your Guide for College Financial Aid - Finaid; for details on FAFSA exclusion.</p>
<p>While assets in an IRA are ignored by FAFSA, money put into an IRA this year would be added back to income in the EFC formula. Income impacts the EFC by more than assets (up to 47% for income versus up to 5.6% for assets).</p>
<p>Here is the FAFSA formula for 2012-2013. You can print it out and work through several different scenarios: <a href=“http://www.ifap.ed.gov/efcformulaguide/attachments/082511EFCFormulaGuide1213.pdf[/url]”>http://www.ifap.ed.gov/efcformulaguide/attachments/082511EFCFormulaGuide1213.pdf</a></p>
<p>But more important than your EFC or what any college’s version of the CSS Profile concludes that your family can pay, is what you and your husband determine that you can pay. Sit down with him, and get that figure straight in your heads. Then tell your daughter. She needs to know now which colleges/universities are going to be affordable for her if the financial aid doesn’t work out.</p>
<p>Also be aware that CSS Profile schools aren’t always generous to the self-employed. Those schools will often “add back in” deductions making income seem much higher. </p>
<p>While assets from a small business do not count for FAFSA, I wonder if people can really just move all their savings into a business account. Maybe so…that just seems like an odd rule. I thought the rule was that the physical assets (like machines, the building, etc) weren’t counted. If money in business accts aren’t counted, then why would any small business owner keep any money in family accts? But, I don’t know…just seems odd.</p>
<p>Murrow mom…before you do any financial gymnastics, determine if the schools that your D would be applying to are the types that give big aid to those who have “determined need.” Most schools do not have much aid to give. </p>
<p>And, if your family’s income is high, then moving assets won’t help much/any. </p>
<p>And, again, CSS Profile schools can be brutal to the self-employed, so perhaps try to get an early read from the school as to how they would compute your need (if you have any need).</p>
<p>
</p>
<p>From the link I posted earlier:</p>
<p>
</p>
<p>There apparently is no exclusion for cash in the business. If there was a large transfer of cash into the business during the basis year, perhaps that would raise some flags - maybe kelsmom could comment.</p>
<p>^^</p>
<p>yes, it would be interesting if kelsmom could comment on this. If this is allowed (hiding savings by putting family money into a business acct), no wonder CSS Profile schools are famous for adding back in deductions…they know that some hanky-panky goes on sometimes.</p>
<p>I’m familiar with the FAFSA exclusion…it just seems odd to me that a loophole like that would exist. Why wouldn’t everyone with lots of savings start a “small business” and shove everything in the business’ name?</p>