Hello-- I have a current 10th grader with a custodial CD savings account. This money resulted from an insurance settlement ~40K. The CD does not mature until his 18th birthday, Dec, of Senior year. Does anyone know if I can strategically move it into another type of account so that it doesn’t greatly hurt his financial aid package? We are new to the college application process so TYIA.
You need to do a few things before you worry about a custodial account. For many colleges it won’t matter at all…they don’t have aid to give beyond Pell (a federal entitlement) and loans. So get together a plausible list of where your kid is likely to apply.
Then run the Net price calculator for each school using as accurate information as you can about your finances. You can see the impact of the account… Which could be $20 give or take.
Then come back and we can help.
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@kelsmom how do insurance settlements factor into the FAFSA.
@blossom…not sure where the $20 amount came from. On $40,000…IF this is counted as a parent asset (per FAFSA), it would be assessed at about 5.6%. So that would be $2200…Give or take.
If it’s counted as a student asset, it would be 20% so…$8000.
BUT @kelsmom can explain how this is counted…and whether it might be good for a special circumstances consideration (which would remove the asset) because it’s an insurance settlement.
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I wasn’t doing the math. I was pointing out that many people who worry about the impact of this or that account don’t realize that they don’t qualify for ANY aid besides the federal loans at most of the colleges on their kids list. So until OP does the NPC’s, no need to do ANYTHING.
I’ve got a family member who got REAL busy retitling assets, moving accounts, cashing things out… and the kid ended up at a state U which offered zero aid. You qualify for Pell? Great. You don’t qualify? You get gapped and you can either afford it or not.
So I try to save folks the trouble of worrying about until they’ve verified that at the “likely” colleges on their kids list, they will qualify for more than just loans!
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@blossom…totally agree.
This family needs to look at the colleges, and do net price calculators. And determine IF they would qualify for need based aid anyway.
I would also urge them to look at colleges where this student would qualify for guaranteed merit aid, or a good chance of getting merit aid…as that won’t take income or assets into consideration…at all.
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The $40k will need to be reported as a student asset when need-based financial aid forms are completed. Other than spending it for legitimate beneficial needs of your 10th grader before college application time comes, I don’t know of any legal and ethical way to make it go away. Look on the bright side- your kid has $40k to help pay for college that most kids don’t have.
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Thank you all for your input. I’m new to this college journey and to CC. I will definitely sit down with my student and figure out the colleges that best work for them and try out the NPC tool and report back. Thanks again!!!
@BelknapPoint is right - it’s reported as an asset. If it looks like you might get Pell grant or institutional grant money if you run the NPC without the $40,000 included, you may want to consider talking to the financial aid office about the situation. I don’t know that there will be anything that the school could do in terms of accounting for the money that would help you, but it’s always worth a conversation. In terms of moving the money around to avoid it being counted, I don’t know of a way to do that (legally/ethically).
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