Cash vs. Bonds?

Paying for College
1

<p>I started college last year, and took up a 30hr/week job to save money for when I transfer. By transfer time I will have about $10,000 saved. Problem is that when I got my financial aid this year (based on what I made last year), all the loans combined didn't even cover the modest public tuition ($7000), let alone books. A part of this was that I had several thousand saved, I assume.</p>

<p>Would it reflect better on next year's financial aid if I dumped my money into a medium term savings bond, or for the student is there no allowance at all?</p>

2

<p>Are you an independent student? Dependent students have no asset protection allowance. 20% of assets would go to the EFC. Independent students start getting some asset protection once they are about 25. It starts out fairly low. But if you are an independent student and earn under $50k and are eligible to file a 1040A or EZ, you would be eligible for simplified needs and assets would be ignored.</p>

<p>Being in savings bonds would make no difference at all. Still an asset and treated the same as case in the bank (20%).</p>

3

<p>No, I’m 19 and live at home, so I’m dependent.</p>

4

<p>Then your financial aid is based on your parents income and assets and your own income and assets. </p>

<p>As a dependent student you have around $5500 in income protection. Anything over that 50% goes to your EFC. And 20% of your assets go to the EFC. That is on top of whatever impact your parents income and assets have on the EFC.</p>

5

<p>Oh wow, I get taxed both for making money and then for saving.</p>

6

<p>Yes. Same happens to parent savings.</p>

<p>Though if your parents qualify for the simplified needs test all assets are ignored.</p>

7

<p>Just a question. What would happen if the student invested a part of the money in say a Roth IRA, which is considered a retirement saving and not normal savings. You can invest only up to your earned income. Would that protect that amount (say you put in $4,000 in a Roth or even a regular IRA though there would be no point in doing that), would that $4,000 not be considered for FAFSA purposes.</p>

8

<p>mazewanderer - For the year the money was earned, it will still be counted as income. The IRA savings would/should not be counted as an asset.</p>

9

<p>In some cases, it may make sense to put some of the student’s earnings into a 529 so that it is reportable under FAFSA as earnings, but is included with the parents’ assets rather than the student’s.</p>

<p>Then again, if you are like most students, these earnings aren’t going to be sitting in the bank come next January. They will be spent down on college expenses this fall.</p>