<p>Please let me know how excess monies (sitting in the bank account and/or invested) from financial aid get reported on FAFSA and Profile when reporting for the next year's FA.</p>
<p>How would it be calculated as well in order to determine how much of the bank account is FA dollars? </p>
<p>Thanks</p>
<p>You don’t report excess aid that is sitting in the bank. </p>
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<p>It would be up to the student to keep track of how much money in their account is from FA.</p>
<p>What if a portion of that aid was used for an IRA, CD, or some other investment? Is it ever reported?</p>
<p>Do we just pretend like it is not there? So if they look at the bank statement and see a lot more than reported, do we just tell them that is FA money?</p>
<p>That would be unusual. Most of the time, excess aid is just sitting in the bank while it is waiting to be used to pay for schools expenses. For instance, by daughter got a refund that was then used to pay for her rent and living expenses. It sat in her bank, but was certainly not being used for investments. In most cases, i would not expect there to be sufficient for investments or CDs. I think it would be a little difficult to convince a school that such funds are from FA in case of verification. </p>
<p>IRAs are not reportable. However, I don’t see how money from financial aid would be able to be used to fund an IRA as there must be earned income for an IRA to be possible.</p>
<p>Regarding the IRA, I thought you could just open one with whatever funds… so my bad (ignorance).</p>
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You can’t open IRA with your excess F.A. See [Publication</a> 970 (2013), Tax Benefits for Education](<a href=“http://www.irs.gov/publications/p970/ch01.html]Publication”>http://www.irs.gov/publications/p970/ch01.html)
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<p>Scholarship monies, after “qualified” expenses, are indeed taxable.</p>
<p>Yes, they are taxable. But lots of different types of income are taxable. Not all are considered compensation. Only income that is considered compensation can be used for purchasing IRAs. This would include things like wages and self employment income. Taxable scholarships are not “compensation” and can not be used to fund an IRA.</p>
<p>Thanks for the clarification. I was just throwing out examples of possible investments, not understanding how they could (could not) be funded.</p>
<p>S has I think, roughly 2k left over from the fall semester, and now he has gotten spring semester’s funds too that leaves him (currently) with a lot more than 2k in excess. </p>
<p>I just mostly want to clarify that those monies are completely ignored when filing for 2014-15 FA. IF S chose to invest those monies… would those not ever be reported as assets (for the sake of financial aid applications)?</p>
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<p>Yes, but the kind of scholarship monies you are thinking of aren’t reported in Box 1 of a W-2. Scholarships and fellowships are reported on a W-2 when they are in exchange for work or service, such as a teaching or research assistant.</p>
<p>Any financial aid proceeds sitting as assets are not to be reported. But you have to be able to show that the amount you are so claiming are truly from financial aid. The best way is if you have them in an account and the balance never went below the amount you are claiming is the fin aid amount. The instant you go under, you cannot replace it. it’s new money that is replacing it and not fin aid money, if you get my drift here. But, yes, the money is not counted as assets for students. </p>
<p>IRAs can only be opened when you get the money from earned income and other listed sources. You can’t open an IRA on scholarship money or money you get from investments, for instance. It’s pretty much what is considered “earned income” by IRS definitions. Look up what income you have to have to make an IRA contribution.</p>