<p>I am looking at this question in a different light. It is true that students are expected to contribute to their education even if the family situation is quite dire and the EFC is zero. It is also true that if you have money saved for college, it should be used for that purpose. But there is a situation with financial aid that is very troubling and many of the top colleges acknowledge this situation, but most schools do not. That is the policy that any funds in the student's name are expected to be tapped at 35% of the amount on the closing date asked by FAFSA. The big problem with this requirement is that those with foresight and some financial savvy make sure that there is very little money in the student's account on that date, as family assets are only hit up about 5%. So you get the situation of two families with identical financial statements except Family A has had the student save all of his money in a designated account for this student since day one. He now has $20K saved up for college. He now has to pay $7000 out of that account for his freshman year regardless of any other family situation. It a locked in formula, unless the college has specifically decided that this is an unfair situation and counts it as family assets as a few of the top colleges have done, but this is very rare as of now. Family B has blended the savings in a designated family account or spent down the amount for the student's expenses so that Student B has zero in savings. That same $20k is assessed about $1000 in that case or not at all. And every financial planning book, college finances book addresses this issue, advising families to avoid what Family A has done.</p>
<p>It is a troubling situation since I do believe that when you have the money to pay for college, you should pay for it. I grew up with an accumulation of savings bonds and a bank account, painstakingly accrued over my lifetime with my parents' help for the sole purpose of paying for my college. And I never gave it a thought that the money should go any other place. However, I don't believe the college planning network was as extensive in my day, and as I was given generous financial aid and scholarship fund, I don't think my savings had that much impact on what was given in financial aid. That was 30 years ago. Today, it is a different story. I think any financial counselor would be remiss in not having the student either spend down his account or "giving" it to the family so that it is not assessed the whopping 35%. I say this because it is rare in the scope of things that a student gets 100% of need--only a few schools can afford to give that, and the cushion that the student fund could LEGALLY give if it is thus diverted ahead of time can make a difference in affording a school. Even schools that give 100% of need often give loan and work options that can make it tough for a student.</p>
<p>I am NOT advocating stuffing the money under a mattress and hiding it or doing anything illegal. There are a number of LEGAL ways to divert those funds and not have them get hit the 35% by FAFSA.</p>