Will moving your student’s assets out of their accounts before submitting the FAFSA be perceived as dishonest or attempting to conceal assets?
Here’s the formula. Work through it on paper, and see what kind of difference it makes if the money is in your kid’s account, or in an account in the parent’s name. http://ifap.ed.gov/efcformulaguide/attachments/090214EFCFormulaGuide1516.pdf
It might not be worth the trouble to move the money around.
If you move them to your account and then pay for college costs or other expenses for your kid, that is fine.
Well…where are you moving it to…and how much is it? If you are stuffing your mattress, the money still counts.
Moving to a 529?
No, it’s not, unless the kid’s money in the parent account is being reported as a student asset for financial aid purposes. In which case, what’s the point of moving the money in the first place?
Simply moving the student’s money to a parent account doesn’t change it from a student asset to a parent asset.
No? It would no longer be part of the “Balance of savings, checking,…accounts”. How does that not change it from a student asset to a parental asset?
You are going to get differing opinions about this. As far as I have seen, giving the money away to anyone before filing the FAFSA is perfectly permissable. I’ve known many kids who have reimbursed their parents for their expenses. You can also transfer it to a 529 (ownership NOT the kid’s if PROFILE schools are in the mix because some will still count that as a child’s asset whereas if the money is in a 529 owned by someone else on behalf of the kid, it doesn’t). Or you can prepay some bills. The same can be done with parental assets before filing FAFSA. It’s is outright recommended that you prepay bills, etc before filing and get that asset number down as low as possible. But for parents, the hit is 5.6% after protection allowance in terms of FAFSA EFC For the student it is a whopping 20% right off the bat, and for some PROFILE schools even more.
Thank you for your reply. Our situation is that the CSS showed these assets in my child’s name, as did the FAFSA. If I moved the assets now, I would have to submit a corrected FAFSA, which i assume would put our application under much suspicion and scrutiny
You cannot change asset amounts on FAFSA unless they were listed in error. You can’t just spend down the assets and then refile. The assets as of the first time you filed FAFSA stand for that year’s FAFSA. The CSSPROFILE and FAFSA asset amounts are not expected to match.
The question is very simple as to assets. You report assets on the day you file the FAFSA. For verification, your account balances for that day will be checked.
Thank you again!
Your first post asked if this would be perceived as dishonest or attempting to conceal assets. I have a feeling that if you are using theses words, you know what the answer is. Unless the student is making a legitimate gift to the parent, with no expectation about what the gifted money will be used for, a transfer like this from a student account to a parent account is an attempt to conceal. Why else do it? If there wasn’t such a thing as FAFSA or CSS Profile, would you be thinking about doing it? I doubt it.
Unless it was a legitimate gift, it would still be the student’s asset, even if it was moved to a parent account. The FAFSA instructions are very clear about this. Anyway, you’ve already filed your FA forms. cpt is right; you are done.
Thanks for your opinion. I do not see it as needing to be a gift. It could be payment to us for legitimate expenses such as car insurance, etc. In fact, we held off on taking such payments from our daughter because we were worried about its appearance, but that doesn’t mean the reason for moving the funds was dishonest. My question asked about how moving funds WOULD BE PERCEIVED, not your opinion on its honesty.
It depends, it could be perceived as fraud.
Well, you got my opinion anyway. Bonus!
Ask yourself this: would you be asking your daughter to make payments for these expenses if there weren’t any financial aid implications? And besides, that’s not how you phrased your original question, which simply asked about moving student assets out of a student account, presumably in order to get more favorable FAFSA treatment. You didn’t say anything about a student using her assets to pay some of her expenses.
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No, it's not, unless the kid's money in the parent account is being reported as a student asset for financial aid purposes. In which case, what's the point of moving the money in the first place?
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I don’t think so. A student can give parents money as a “gift” and the parents can use the money towards the child’s expenses.
There are varying opinions about this. My stance has been that it’s not an issue when it’s a money flow between parents and children. But My opinion only. My kids and I have back and forth finances all of the time.
Or a student can give money to his parents as payment for his current expenses or future expenses. The parents can then use that money towards college costs.
The student could give the parents money now as repayment for car insurance, cell phone, food and other expenses…and that “frees up” more money for parents to pay towards college.
The fact that you put the word gift in quotes is telling. If it’s not really a “gift,” that is, if the expectation of both parties is that the “gift” will be used for a specific purpose, then it’s a fraudulent transfer. Especially if the “gift” is being used to benefit the gift giver.
Based on your logic, a student who has $100k in a savings account that would otherwise be assessed by FAFSA at 20% could “gift” that money to the parents, and it would then be assessed at 5.6% by FAFSA, after any applicable asset protection allowance. Presto, you have an immediate EFC reduction of at least $14,400. Do you really think this is a strategy that FA officers consider above board?
^^
Ok…so maybe gift isn’t the right word. The student can give the parents money now to cover the student’s current and past expenses…food, car, car insurance, gas, cell phone, etc…and then the parent can say/think…ok, now I can better afford college costs.