Do colleges consider 401K savings in financial aid decision?

Paying for College
1

I assume FAFSA only schools do not as the balance is not entered. (I am not referring to the FAFSA year contribution)

But what about CSS profile schools ? I knew school uses its own formula, but does school ever consider the 401K balance? I thought I had read that it is not, but I couldn’t find any written policy.

2

That’s because every school that uses Profile has its own policy on how to use the data, and they generally do not make it easy to figure out what matters and what doesn’t. Having said that, it’s unlikely that savings in a qualified retirement account, like a 401(k), will have an impact on institutional need-based aid, unless the number is unreasonably high.

3

@BelknapPoint is correct.

Look at the net price calculators for the schools. IIRC, the vast vast majority do NOT ask for balances in qualified retirement accounts…at all.

4

thank you.
But isn’t the balance of the 401K plan is reported on the CSS profile? I assume 401K is a qualified retirement account, right?

5

Did you use the CSS for your child’s applications? If you didn’t fill it in, who did?

6

I did, I filled in the 401K saving balance in the CSS profile. I think the colleges are using it to determine financial aid.

7

I am reading more and found out FAFSA has “Asset protection allowance”, does anyone know whether CSS profile consider “Asset protection allowance” ?

8

@annamom

Did you include the retirement account balances with your regular savings assets?

What makes you think the colleges are using it to compute your aid?

As noted by @BelknapPoint that balance would only be looked at if it is very high relative to your income. For example, if you are Pell eligible, and you have $3 million in your retirement accounts…someone is likely to wonder how…and why…that happened.

9

I have entered the 401K balance under “Current value of tax-deferred retirement, pension, annuity and saving plan”, I think I entered it correctly, right?
I found out a meet full need school calculates my kid’s parental contribution to be very high and my 401K balance is relatively high (I think, I know it is subjective).
I am just trying to figure out what the financial aid office before talking to them, anyway, I am going to give them a call on Monday.

10

Schools don’t typically use the balance IN your account…but they do add back in your contributions to that account from 2016 as income.

Yes, do call…but even schools that meet full need can have awards that vary by $10,000 or more @sybbie719 can explain!

11

Do you have a lot of home equity? That CSS school with the much higher parental contribution could be counting the full value of home equity (expecting you to borrow against it) whereas some schools don’t consider it at all and others only consider some portion of it relative to your income. That is one major reason why the numbers at full need met CSS schools can vary so much, especially if you have a lot of equity.

12

If the home equity were used, does anyone know it is factored into financial aid? I knew about colleges either consider 100% of equity or capped the equity to no more than 125% of income, but if home equity is considered as asset, how many percent of the equity will be used as parental contribution?

13

That’s up to each school using the CSS. The CSS just gathers information. The schools decide how to use the information when awarding FA. Some schools that do consider home equity make public how much they consider it in their formulas.

14

thank you. Will the colleges consider more than 5% of the “equity”?
My house is paid off, but I do not own a McMansion.

15

Each college decides what percentage of equity to use. Did you run the school’s Net Price Calculator?

16

Colleges use home equity in a variety of formula ways.

  1. Some use full home equity so if your house is paid off, and it’s worth $200,000, you would have $200,000 more in assets.
  2. Some colleges use a %age of your income as a cap.
  3. Some colleges set a %age of the equity as a cap.
  4. Some colleges don’t need use primary home equity at all.

So…depending on how the colleges USE your fully paid home equity…this could add a huge chunk to your net cost.

Remember…schools using the FAFSA only don’t use primary home equity at all…and neither does the FAFSA.

17

^ Some school give protection for certain amount of equity before counting as asset. Also, they use their formula to calculate which may be different from liquid asset.

18

Yep…and home equity is ONE reason why financial aid awards even at schools that guarantee to meet full need…vary a LOT.

If the school doesn’t guarantee to meet full need…all bets are off.