My friend has one child at a private college and another going to a private college starting in September. Filled out the fasfa in January and since then both parents died and left her with a million dollars. From what I gather she gets good aid and probably has a family income of $65,000ish. She’s wondering what is going to happen to her aid and if she will now be full pay at these colleges. My thinking is she will be full pay at these schools due to assets but really have no idea especially for this fall since fasfa was already filled out. Any help would be appreciated.
sounds like for this year, the windfall won’t matter since she already filed FAFSA before getting the money.
FAFSA takes a snapshot of assets on the day its filed, so for your friend, for this next year, her inheritance won’t change anything.
However, for future years, that money will be a huge asset and well as a source for income (assuming that she invests it well).
Sounds like she needs to figure out how best to invest that money to help “pay” for college for 3 years (3 for one child, and remaining years for the older child).
$1M well invested could net her enough to pay for her kids’ college costs.
I hope she connects with a good investment/brokerage firm who will advise her how to best invest for income and growth.
It’s very unfortunate that she’s lost both of her parents, but financially, she’s in a good place right now.
Just an aside…money from inheritance is not considered marital money AS LONG as the money is always kept separate. I would advise that your friend keep all that money separate…never mingle with marital money.
Also, it doesn’t count as an asset until it’s in their hands, right? If they died in January, an estate wouldn’t be settled by now. I guess you’d need to know whether this was a bank account shared with the heir(s,) or set up as payable on death, or some other vehicle. And then the assets would be subject to the 5.6%? Unless they converted a chunk to legit retirement investments?
If both children are in private colleges, is it possible that those are Profile schools? It may be that FAFSA was used generically in this conversation. The inheritance may still have an impact on the Profile, right?
I do believe one of the private schools is a Profile school and the other isn’t. So I’m assuming the inheritance will affect the price of that school for this coming year. She and her siblings have some of the money but need to sell some real estate and other assets yet. She has 2 more kids that will be in college in a couple of years so she is now seeing how private schools can be a huge drain on the bank account. In fact she told me she was shocked when our daughter wanted to attend a private college and we said that was going to be a no go. $15,000 extra a year times 4 years was $60,000 saved:) It makes a big difference whether you’re on the so called bubble or not.
Let’s assume she invests her inheritance in land that will appreciate in value and she sells when they retire. Even though still makes $65,000 a year won’t her financial aid disappear because of her assets??
Yes, I will talk to her about keeping the money separate as one of our best friends was divorced and thankfully kept his inheritance separate. Are there any other reasons than divorce to keep the inheritance money separate???
The question now is how much of that inheritance Mom has in a bank account when she fills out the Profile. Now what will later come to her. The amount of inheritance she has in her bank account can be assessed at roughly 5.6%. The only place assets are really sheltered is in a qualified retirement plan. My understanding is that an investment in land is an asset, roughly the same as money in the bank (even though that’s not the reality.)
Also remember that not all colleges meet full need, in the first place.
Why would it affect the Profile school?? Unless she has received the money already, and she hasn’t yet filed Profile, why would it affect that school for this fall???
If she’s already filed CSS for Fall 2015, then it won’t impact that. There isn’t a “look back” to see if money came in after filing.
It sounds like both parents died in January? If so, then likely she doesn’t even have most of the money yet. And it’s not yet hers to declare until it’s really given to her after debts and other expenses are settled.
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She and her siblings have some of the money but need to sell some real estate and other assets yet.
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Has she filed CSS already?
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Let's assume she invests her inheritance in land that will appreciate in value and she sells when they retire. Even though still makes $65,000 a year won't her financial aid disappear because of her assets??
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Yes, likely the FA will disappear for FUTURE years (probably not for Fall, unless she hasn’t yet filed CSS).
Yes, it may seem annoying that her FA will disappear, but if she invests WISELY, then she shouldn’t need to spend the capitol…she can spend the earnings on the investments. She needs to make that money WORK FOR HER.
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Yes, I will talk to her about keeping the money separate as one of our best friends was divorced and thankfully kept his inheritance separate. Are there any other reasons than divorce to keep the inheritance money separate???
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Yes…divorce is the BIGGEST reason…but in many cases, it just helps keep control of the money. My mom kept total control of her inheritance by never mingling one cent, so that when my (cheap) dad would say “no” to something she wanted, she’d use her inheritance. I have done the same with my inheritance…kept things separate.
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She has 2 more kids that will be in college in a couple of years so she is now seeing how private schools can be a huge drain on the bank account.
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then, she needs to research schools that will give large merit awards that don’t consider finances. She needs to learn NOW about those, so that she can properly direct her kids (manage their GPAs, practice SAT/ACT testing, etc)
It sounds like she needs to file the CSS ASAP according to what you’re saying since most of the money is not in her account yet. She did the FASFA but I’m almost positive she hasn’t filled out the CSS. I know my daughter’s school requires that we fill out the CSS, but it is only done once so I would think it’s not required after the first year at most schools.
Yes, it sounds like there is no way she could keep her kids in school and invest the money in land, so investment income is going to be crucial for her to be able to keep her newly acquired nest egg.
I’m guessing her daughter will end up at the non Profile school as my friend is extremely frugal with her money. Looks like that will cost more if she still needs to file.
Her 2 college aged kids are receiving some merit awards and I know the other 2 are bright as well so will tell her to pay even closer attention to this than before.
There are some schools where you do the Profile once but I believe that’s dwindling. They need to capture a snapshot annually.
And growth on an investment (eg, stocks,) is income.
Even at a Fafsa-only school, assets are assets. And most Fafsa-only don’t offer much need based aid.
If she invests a portion in land, it’s an asset. I don’t believe she has to speculate on any annual growth in value. Unlike a new home or second home, there’s little way to verify. But land is the sort of decision that requires a savvy counselor. Any advice should ideally come from somone who understands FA, not all do.
If her share will really be a mil, she can put some into a carefully chosen, protected retirement plan. When you think about it, that’s no more tied up than sitting on land, hoping it appreciates before you want to sell. If she keeps say 500k in assets, the roughly 6% tap would be 30k per year. If it’s 200k, 6% is 12k.
At some schools even after you fill out the Profile and send the IDOC, schools will still send you additional verification forms. As looking forward has stated family must reapply for aid each year so your friend should expect the financial aid package to change each year to reflect their financials.