hi there. your thoughts are appreciated.
a dear stay-home mom friend lost her husband in 2013. she has since gone back to work. her income isnt super high; she has two kids; and savings from life insurance, and a 529 account.
any idea how their finances and EFC will roll? do the forecasters take a parents death into consideration? and savings from insurance?
and where does a 529 plan fall into efc? parents side or kids side?
thanks for any thoughts –
For fafsa, a parent owned or a student owned 529 are counted at the parent rate for assets. If the insurance proceeds are sitting in any kind of non-retirement account, they will be assessed at the parent rate of 5.6% on the amount above the savings allowance. The savings allowance for a single parent is very low, probably under $10k. It depends on the age of the parent.
If her AGI is under $50k though and any children qualify for free/reduced lunch or other assistance or if she can file a 1040a she would qualify for the simplified formula and her and the student’s assets would not be counted.
A college for their own funds may count a student owned 529 at a student rate of their own choosing.
Do the kids receive SSI? One idea is that if the kids have SSI in a savings account, it could be moved to the 529 before the FAFSA is filed so that it is hit at the parent’s rate (5.6%) and not the child’s (20%).
Is the older child a senior?
Can the mom save the SSI?
If the income dropped a lot, then likely she is needing that money to support the kids.
thanks for the thots. oldest is a senior; shes looking at a LAC and instate flagship. I dont know about SSI. but definitely will mention that all to her.
i guess i was hoping there was some magic box to check about having a parent die and that would help with financial aid. but, i guess that doesnt make sense as theres lots of single parents out there.
is there a FAFSA formula that divides percentages between income and savings? are most 529s in parents names?
Most 529s are in parent’s name with the child as beneficiary.
Here’s the fafsa formula. It’s complicated with a bunch of tables you need to reference. Fafsa is largely income driven, income counts more than assets. The link also explains the simplified formula and the auto 0 EFC.
http://ifap.ed.gov/efcformulaguide/attachments/090214EFCFormulaGuide1516.pdf
There is also the fafsa4aster which will give an approximation of fafsa efc:
https://fafsa.ed.gov/FAFSA/app/f4cForm?execution=e1s1
Schools that require either their own additional finaid form or the CSS profile to award institutional aid will each have their own formula based on the more detailed questions asked on those forms.