I received money through a court case after filling for fafsa. I don’t want it to affect my financial aid, so I would rather not keep it for myself since I have a job already. If I gift it to my family members (not my parents), do I have to report it to anyone?
How much? It’s probably OK if it’s less than $3000, the amount that students are expected to contribute to college education each year.
Way more than 3,000… It’s about 20,000 I think.
20% of your assets will be added to your EFC (assuming no special circumstances like your parents qualifying for auto-0 EFC). So 20k = 4k higher EFC.
FAFSA does not give money. It is just a form to determine whether or not you’re eligible for federal aid. Pell eligibility (grants for low income students) drops off around an EFC of ~5300. Your 4k in assets already puts you very close to that limit.
Everyone who files a fafsa is eligible for Direct loans (either subsidized or unsubsidized depending on your need) and you may qualify for federal work study (again depending on need).
A couple of things.
- Terrific that you have saved some money...or been given some money. Perhaps using some of that for college is a good thing.
- You could put the money into a 529 account. That way it will be assessed for FAFSA purposes as a parent asset at 5.6% of its value. But remember..529 accounts also have to be used for educational purposes.
- The amount of assets are reported as of the day of filing the FAFSA. So...if you have any necessary purchases (like a new computer for school use), you could buy it before you file your FAFSA and the amount in your account will be reduced.
- As pointed out by @romanigypsyeyes this might be important IF your family is a low income family. However, of your family is not lower income...it might not matter much anyway in terms of financial aid received. Need based aid is largely driven by parent income...plus most schools don't meet full need anyway.
- If your parents have regular w-2 earnings from a job...not self employed, don't own real estate in addition to your primary home...run the net price calculator on the colleges' websites that you are interested in. See what your net cost would be approximately.
You can do this with and without that $20,000 in savings to see how it affects your net costs.
Thank you all for helping me out! I have one last questions because I’m sur this is important. The money wasn’t really saved up throughout the years but awarded to me from a court case. The money was given to me, but since I’m still underage I can’t access it. Does this matter?
What Is the financial vehicle that it is contained in? Your first post said money in the bank (which is cash money), that is unlikely in a settlement. Is it a lump sum payment?
I believe it is a lump sum payment. From what I understood the money was placed in a bank account all at once. But I’m not sure, sorry!
Maybe @kelsmom can weigh in but if it’s in an account in your name, I’m pretty sure that it just counts like a regular asset.
There are a lot of pieces to the puzzle missing, but if it is just money sitting in your (student) account on the day you file the FAFSA, yes it would reduce your federal aid (if you qualify). If you won’t be 18 before you file FAFSA the first time, I don’t know how you’d account for it. If you turn 18 before you need to file FAFSA, you could, as someone suggested about, put it into a 529 account and it would be assessed against your EFC at the parent’s rate, 5.6%. You could also spend it before you file by buying a car, computer, or even a house.
But before you do anything, find out if it will even matter. Run a FAFSA without the asset and see if you qualify for any financial aid. Then run it with all $20k in a savings account (as a student owned asset). Then run it as if you put it in a 529 account (so it will count as a parent asset). Any difference in the EFC?
Before I say anything, I’ll clarify because even I feel confused about everything since I’m still 17 and haven’t gotten the money. All I know is that the money is in an account that no one (including my parent) can access. I will be the only one able to but I won’t be 18 until a few months. I filed for FAFSA without the money and I do qualify for financial aid.
If it helps, my older brother filed for FAFSA and received 10,000 in aid with about the same amount of money in the bank because he was awarded money from the same court case. So far he’s had no issues???
And he didn’t include the money he had in the bank either because when he filed he still wasn’t 18 as well.
Once again, FAFSA doesn’t give you money. It’s just a form. The most aid you can get from the gov is a few grand less than 10k (which would be the full Pell). If he got that much, it came from either the state or the school (in addition to the feds if he qualified for Pell).
What is your EFC currently without the money?
Did you have to enter information about your income and assets? If your parents made less than 24k and could answer yes to at least one of a series of questions OR if they made less than 50k and could answer yes to a question, then they qualify for auto-0 or simplified needs (respectively). Both of these disregard your assets.
Finally- IF your brother made a mistake in not including it, that doesn’t mean that it’s OK and you can do it, too.
Are you going to be 18 before October 1?
It may not matter. A settlement/lawsuit award like this would generally be treated the same way as a trust fund which the student/beneficiary doesn’t have access to until a future date: it gets reported on FAFSA as a student asset. You can’t pretend it doesn’t exist based only on the fact that you won’t have access to the money for a few more months. Note that there are some exceptions to these policies, so it’s impossible to provide an accurate answer for your specific situation without more details.
A slight clarification: 529 assets do not have to be used for educational purposes. 529 money can be used for anything the account owner wants to use it for. The catch is that any earnings portion of a 529 distribution that is spent on non-education qualified expenses is subject to income tax and possibly a 10% penalty as well. In the situation here, if OP put the $20,000 into a 529 account on Monday and then took it all out on the next Friday with no earnings for the purpose of buying a boat, there would be no tax and no penalty. If there was $20 of earnings over that brief period, this small amount would be subject to income tax and probably the 10% penalty as well (assuming no penalty exceptions apply).
You don’t have to include it on this year’s form because you didn’t have it yet. You will have to report it next year. Why not use some of it for college so it benefits you instead of giving it away? Student assets are assessed at 20%, so for every $1,000 you have (above ~$6k, I think) $200 will be added to your EFC. If you have money to help fund your own education, you’re in a better position than most students
If you intend to get it back from these family members it’s not giving it away, it’s hiding it. You still have to report it. If it’s a lot of money, there are ways to minimize how much will be added to your EFC.
You got good advice on your PREVIOUS thread about exactly the same topic.
Is there an asset protection allowance for the student?? Not sure about that.
Anyway… @AndyMad1 are you giving the money away forever?
You said…about $20,000…so that would add about $4000 to your family contribution each year.
If the money is put into a 529, it will be assessed at the parent rate…so it would be about $1000. Do that.
Wouldn’t it be smarter to use that money yourself than to give it away? Or were you planning to get it back once your FAFSA is completed? Please clarify.
ETA…you also wrote this:
What are you talking about? You wrote this in July. What FAFSA did you complete…because the one for the 2018-2019 school year won’t be available until October 1.
Also…as written on your other thread…this could be MUCH ADO ABOUT NOTHING. Do the colleges you are applying to meet full need for all? Is your EFC less than $5000 without this money?
I have money in the bank that I will have access to only when I turn 18, however, I don’t know if this will impact the amount of money FAFSA will give me?
Let’s say that the money you got/will get from the settlement is $20,000. If you have that money when you submit your next FAFSA, that could potentially cost you $4,000 in financial aid, as others have already noted here. So are you really thinking of giving away $20,000 (and I mean, no kidding, really giving it away, not just having someone hold it for you while you’re in school) so that you don’t lose $4,000 in financial aid? Really? You’re asking about giving up $20,000 so you can have $4,000? In what reality does this make any sense?
It looks like your two threads have been merged on this forum here.
I would strongly suggest that you start at the beginning of this thread…and read all of the responses…again. Many of the responses on the first thread are now contained here…and give excellent advice.