If a flow of money between parents and kids was acceptable, then it would seem as though the asset protection allowance/assessment rate should be shared/the same rate.
Current, legitimate expenses? Maybe. Future expenses? No.
Here’s my take on it, which I have made known: if it’s an expenses that the student would be reasonably expected to pay anyway from his own resources, and if painting a better picture for financial aid evaluation wasn’t a consideration, no problem. For example, if the parent’s auto insurance premium is due monthly and the student makes a monthly payment from student assets to the parent that equals the difference between the policy premium with and without the student on the policy, that’s fine.
On the other hand, if there is an asset transfer from the student to the parent that supposedly reimburses for the cost of food and lodging, that should raise concerns. How many parents charge their college-age kid for food and lodging? Without some unusual circumstances, this sounds like a blatant attempt to transfer student assets to the parent for the purpose of getting a more favorable FA award.
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Current, legitimate expenses? Maybe. Future expenses? No.
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Depends on how far in the future. It would be fine to give money for PAST, CURRENT, and near-future expenses. After all, that is what people typically do…pay in advance for a future expense…insurance, cell phone, rent, etc. I’m not saying that the future expense should be a year from now.
Depending on how much money we’re talking about, but say the amount is $5k. Then it could easily be argued that giving the parents $5k to cover past, future, current car insurance and other expenses would not be crazy.
The above quote sounds like the FAFSA has already been completed…and this parent wants to make these changes when amending the FAFSA. Nope…not permitted to change assets.
This parent has completed the FAFSA already…and the Profile, right? Assets are as of the date of the initial filing of these forms. Any change made now is AFTER that initial filing date. As of that initial filing date, the assets were in the student name. This was not a mistake…it is where the money actually was when the parents filed the FAFSA and Profile.
If money changes hands now, that would not affect what was ON those forms on a previous date. Any money changing, payments, whatever, needed to be done before those forms were initially submitted.
So…can you change these assets now. NO…because your money moving didn’t happen before you filed your forms initially. Those asset numbers were accurate ones as of the date of your initial filings.
Do individuals normally pay $5k at a time for personal auto insurance? No, they don’t. A $5k transfer from a student to a parent prior to completing FAFSA or Profile, with the explanation that it covers the cost of adding the student to the auto policy, is highly suspect (especially as relates to future expenses). It would appear to any reasonable person that the transfer was being done to shift assets for FA purposes, and not because the parent was requiring the student to cover his own auto insurance costs, which is reasonable but would normally be done on a pay-as-you-go basis.
You have said that it would be OK for the student to give the parent money to cover past and current food expenses. I can imagine a conversation with a FA officer who is asking about a $20k transfer of assets from student to parent just prior to the FA forms being filed. “Yes, Mr. Smith, that money was to repay me and Tommy’s father for all the food we bought for him since 1st grade.” I don’t think that would fly.
To the OP…could you please clarify your situation? Have you already done the initial submission of the FAFSA and Profile? Because if you have…the asset amounts on that cannot be changed by moving money around now.
You are incorrect. ANY part of the FAFSA can be corrected. Read the instructions
Michigan…any part CAN be corrected…but assets are supposed to NOT be changed unless there was an ERROR. This OP had an amount on his submitted FAFSA. If money gets moved around from assets after that initial filing, this would not be an ERROR…
And yes…that would likely spark verification.
We were verified four times with one of our kids. One of our schools,asked for bank statements with balances as if the date of our FAFSA filing. We complied…and we were not eligible for need based aid…at all.
We changed an asset amount on a FAFSA once…but it was because we had left OFF an account and needed to add it. It was an error. It needed to be fixed.
You reported asset amounts/account balances as of a specific date. Were those amounts/balances correct, for that specific date? If so, there is nothing to correct as far as that information is concerned.
I think the only time you can correct the savings amounts is when the reported amount was totally wrong. You can’t change it just because you moved/spent money.
If you put that you had $10k on Jan 1st, but you really had $10, then you can correct that.
@MiddKid86 lol…I’m not suggesting that.
@michiganwannabe
For future FAFSA filings, you could do something that Madison85 suggested upthread that would take a student asset and turn it into a parent asset, without any concern about dishonesty or concealing assets: take the student asset and invest it in a student-owned 529 account. The student would retain full control of the asset, would get education tax benefits if used for qualifying education expenses, and for FAFSA purposes it would count as a parent asset.
@Michiganwannabe Have you refamiliarized yourself with the FAFSA instructions to understand the difference between an update and a correction?
The info you have been given is correct.
You can’t retroactively change FAFSA, although you may correct it when you get tax #s.
( or colleges may correct it for you when they receive your verification.
If FAFSA had a ‘clawback’ provision like bankruptcy, then it would make a difference what the student did with his cash the day before or month before filing. FAFSA is a snapshot of THAT DAY and there is no rule that you can’t empty a bank account the day before you file, pay bills, give the money to the parent, etc. (the student can’t withdraw cash and still have possession of it without reporting it). Would the FA office object to the student buying a car the day before filing FAFSA? As long as you are answering the questions honestly, reporting where the money is and in whose account on the day you file, I don’t think the FA office can object or say it is fraud. I have not filed FAFSA yet for this year because I have a lot of bills due this month (2 tuitions) and that will significantly lower my savings. My daughters’ savings accounts will also be lower because they need to buy books and supplies. I am balancing tax years, payments, account balances to get the most financial aid by filing FAFSA on the most beneficial to US without missing the deadline of their schools. I don’t think it is any different than donating clothes at the end of the year, contributing to an IRA by April 15, paying the January mortgage in Dec. for tax planning. This is Financial Aid Planning.
Someone pointed out on CC that joint account should be taken half by each owner for FAFSA and I am a joint owner on my kids’ accounts, so will claim half as a parent’s asset, half as the student’s. That moves half of the savings into my account anyway.
Paying bills just before completing FAFSA is not an issue. Even using cash to buy a car the day before you complete the form is not a problem.
FAFSA doesn’t care where the money is or whose account it is in on the day you file. What matters is who owns the asset. The FAFSA instructions are clear on this. Student owned assets in an account that is titled to a parent are still student owned assets and should be reported as such.
Unless exactly half the money in that joint account really does belong to your kid, you’re doing it wrong. Joint accounts don’t simply get evenly divided by the number of people on the account. From the FAFSA instructions:
Part ownership of asset. If you (or your spouse) own an asset with others and therefore only own a portion or percentage of the asset, you (or your spouse) should report the net asset value that represents only your share of the asset owned. You would determine the current market value of the asset, reduce the value by any outstanding debt, and then multiply the net asset value by your ownership percentage. This result is then reported on the FAFSA.
You can move assets in anyway you want, but if it is still in your possession, you still need to report it no matter it is in your bank account or under you bed.
Or in someone else’s bank account.
And the moving of assets, if you do this, needs to be done BEFORE you initially file the FAFSA and Profile forms. The asset amounts on those forms remain the same even when you update tax info later. The assets are as of the day of the initial filing.
Given the tenor of this chat thread, I’d be interested in opinions on this: having now learned not to put assets in child 1’s name, I am now moving all assets out of child 2’s name, in preparation for his entry into college 2 years from now. I am also moving all assets out of child 1’s name sometime prior to next year’s FAFSA submission.