<p>I have some money in a mutual fund that I may consider spending before applying for financial aid next year.<br>
How early should I spend it before sending my application? And does it matter how early you submit it? Like will you get less aid if you sent it in later near the deadline?</p>
<p>Sounds like a really dumb idea to me. Are you the parent or the student?</p>
<p>I’m the student</p>
<p>Do you have a specific need? (Like – do you know that you will need a car to commute to your college?)</p>
<p>Your financial aid award will be based on your earnings from the previous year and the monetary assets (including stocks, bonds, funds, etc.) as of the day you fill out the FAFSA. So if you are applying for financial aid for fall of 2015, and if you cash out a mutual fund in December of 2014 and spend it all then --then that money is not considered for financial aid…</p>
<p>The problem is that most colleges do NOT promise to meet full need-- so let’s say that you have $15,000 in a mutal fund, cash it out, and buy yourself a car with it. Then you get into college, but the financial aid is not enough to pay your costs. Maybe the award is set up so that you have to take the maximum loan and work study available to you, and that still leaves you $10K short of the money needed to attend college. </p>
<p>So there you will be in April, looking at your financial aid awards, and realizing that you can’t afford to attend any of the colleges you were hoping to attend - because you spent the money that you could have used to pay for college. </p>
<p>If you are a dependent student, a better option might be to move the fund into a 529 account – because it will then be treated under the same rules that apply to parent assets – only about 5.6% of the total value will be taken into account when calculating your aid. </p>
<p>The reason I asked about need is that of course it does make sense to spend the money on something that is absolutely necessary. But you don’t want to confuse needs with wants, and if attending college is important to you, then you want to prioritize preserving funds for college if possible. </p>
<p>December? Isn’t that a little early? I would like to keep my money in the fund longer. I thought most people filled out their fafsa in april? And about the 529 account. So you’re saying I can put my mutual fund in a 529 account and all of a sudden colleges will only want 5.6% of it?</p>
<p>Yes, that is the current standard with the 529 account. Keep in mind that funds in 529 can ONLY be used for education – there are penalties for withdrawal for any other purpose. </p>
<p>And the deadline for completion of the FAFSA at most colleges is around Feb. 1. Most people will fill out the FAFSA in January as soon as it becomes available. At many schools there is a “priority” deadline for filing and if you file later, that in itself can be a reason for denying aid. </p>
<p>Again: there is no guarantee that colleges will give you ANY money no matter how much or how little you have in the account. You seem to want to attend a school that does NOT guarantee to meet full need – (from: : <a href=“BU Changes its Initial Award THIS LATE - Financial Aid and Scholarships - College Confidential Forums”>BU Changes its Initial Award THIS LATE - Financial Aid and Scholarships - College Confidential Forums; ) – and it appears that you are also talking about a fund with $30K (<a href=“Am I an Independent Student? - Financial Aid and Scholarships - College Confidential Forums”>Am I an Independent Student? - Financial Aid and Scholarships - College Confidential Forums; )</p>
<p>If you have that kind of money, the either use it to fund the college education you want - and if you don’t think that whatever college you are now attending is worth your spending your own money… then either find a cheaper college or keep on working. </p>
<p>Some of the things you have suggested doing in other threads are illegal - it’s called a “fraudulent transfer” when you move money around in an effort to conceal the assets in order to secure a benefit for yourself – and you really don’t want to be going down that path. </p>
<p>Money available to you in 2014 will be seen in your 2014 taxes (filed in spring 2015) so it may be too late</p>
<p>Calmom has given you a good portion of the advice needed.</p>
<p>Is your family a low income family? If not, your money moving just might be a waste of time.</p>
<ol>
<li>How about actually using 20% of this money towards your college education?</li>
</ol>
<p>As an FYI, you will have a family contribution and this will not be covered by need based financial aid. This mutual fund money could also help you fund that family contribution.</p>
<ol>
<li><p>Need based financial aid is largely based on your parents’ incomes and assets. You might be doing this financial gymnastics for NO net gain in need based financial aid. In other words…your parent income might be high enough that you wouldn’t qualify for need based aid, or much if it anyway.</p></li>
<li><p>As noted, most colleges do not meet full need anyway. You could end up with a gap between what the college offers you in aid and what it actually costs. You may need that mutual fund money to fund that gap.</p></li>
</ol>
<p>
</p>
<ol>
<li>You should be submitting your FAFSA ASAP after January 1. You will do this using estimates for income, taxes, etc for the 2014 tax year. Getting this FAFSA done ASAP after January 1 puts you in the queue for limited need based funding like SEOG, Perkins loans, and federal work study. These have limited funding per college campus, and are awarded on a first come first served basis…to LOW income families.</li>
</ol>
<p>And ASAP your parents and you need to get your 2014 taxes completed. You then need to amend your FAFSA ASAP after February 1…when you should have all the documentation to complete your 2014 tax return. This is not the year to wait until April to complete your tax return.</p>
<p>Any money you still have must be reported when you file your FAFSA…and that needs to be well before April.</p>
<ol>
<li>Regarding withdrawing the mutual fund money…Jym is not correct. If the money is gone when you file the FAFSA (and Profile, if required by your school), you do not have to include it on the forms. But any interest earned in 2014 will be included on your tax return. </li>
</ol>
<p>But the money has to be GONE…spent. If you have it anywhere (even under your mattress) it must be included.</p>
<p>Certainly, if there are things you need (a new computer for college, for example), you might want to purchase them prior to filing your FAFSA. Otherwise, think very carefully about whether it is truly a good idea to liquidate this account when you may actually need it for college costs.</p>
<ol>
<li>How much is this mutual fund? If it’s $10,000, it would add $2000 to your family contribution. You would still have $8000 left after the first year. </li>
</ol>
<p>And lastly…check for DEADLINES for all required financial aid submissions at each college to which you apply.</p>
<p>My suggestion is to sell out of the mutual fund in January 2015 (any gain then won’t be reported until you file your 2015 tax return in 2016) and put the proceeds in a 529 plan (generally, many investment options are offered in 529 plans), then, complete the FAFSA in January or February when those transactions have occurred. </p>
<p>Consult your tax advisor.</p>
<p>
</p>
<p>Penalties and tax on non-qualified distributions are only assessed on the earnings portion of the distribution, so depending on the investment vehicle and time frame, those numbers could be very low (or even zero).</p>
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<p>People file as soon as they can for the best aid…as soon as they can after Jan 1.</p>
<p>However, FAFSA is for fed aid which isn’t much. Would you even qualify for fed grants??? Are you low income?</p>
<p>Have you used the NPCs on your schools’ websites? You need to do that with your parents to see if you would get the aid that you want.</p>
<p>Yes, put the money into a 529 or give it to your parents to use for your expenses. </p>
<p>My school’s deadline is May 1st. If I submit it May 1st, I can sell it the day before, or does it have to be much earlier? With the 529 account, what happens if you have money left over and you’ve already paid off tuition. The rest gets charged 10% if you want to pull it out?</p>
<p>Financial aid is for people who NEED the money, not for those who do not want to spend their own money on their own education. Put it into a 529 and pay for your own education.</p>
<p>You seem to be being intentionally vague. If you want better advice you need to provide better information. GIGO.
Are you expecting need based FA? What is your parents EFC? What is the COA at the school you are planning on attending? Etc.</p>
<p>lol…go ahead and file on May 1st. I doubt you will get much.</p>
<p>Readers…here is some back-story…</p>
<p><<<<
Little background: I attended BU freshman year and took a gap year to make money for college. Now i’m applying to come back as a sophomore.</p>
<p>I received my financial aid award letter on JUNE 27th and was ecstatic to see that BU gave me a 12k per semester grant.
Before I recieved this letter I was already committed to going to SUNY Buffalo. With this financial aid, I was now committed to going to BU.</p>
<p>I got the letter incredibly late though and there was no more room on campus. I spent a considerable amount of time finding the perfect apartment and planning my classes, only to find out today that the initial award of 12k per semester had been changed to 6k per semester on JULY15th, a $12,000 difference. The reason was, “human error”. Someone typed in the numbers wrong.</p>
<h1>Like seriously? If I knew this sooner I would’ve never considered going back to BU. I haven’t paid for the apartment yet, which is probably going to be sold in the next few days and I haven’t withdrawn from Buffalo yet, which the decision is also due within the next few days. Just imagine, if I paid for my apartment and withdrawn from Buffalo already, i’d essentially have been tricked into going to BU. It’s JULY 15th, the only reason I didn’t do all those things already was because I procrastinated.</h1>
<p>Do you guys think BU was justified in decreasing my Financial aid by 22,000?</p>
<p>Freshman year I paid $22,000. This year, I will pay $44,000.</p>
<p>They did this because I make ~$45,000 which is $33,750 a year after tax making Youtube videos</p>
<p>This absolutely infuriates me because I use all of my free time and I work my ass off every weekend to make this money. I literally finish all my schoolwork and then go straight to actual work with little to no break missing out on social activities and such just so I can pay off my tuition. And what do I get in return? An additional $22,000 more I have to pay.</p>
<p>It’s like the harder I work, the more I will get punished.</p>
<p>Seriously, is there any way I can convince FA to give me a break?
<<<<</p>
<p>Lanoire are you a dependent or independent student for financial aid purposes? Unless you are age 24, married, have a dependent (paying more than half the support of such), a veteran, homeless with documentation of such, you are dependent on your parent’s income and assets.</p>
<p>The way it works is that dependent students get an allowance of about $6K a year of income and then half of that income goes toward student EFC (for FAFSA) and usually at least that at PROFILE schools. The income is that of a calender year. For the school year beginning this fall, like around the corner, your 2013 income is what is used. For assets, the day you fill out the FAFSA, your assets as of that day are used. So if you already filled out the FAFSA for this upcoming school year, those assets and income are etched in stone pretty much. </p>
<p>If you have assets and you have bills that you know you will have to pay soon, yes, you are permitted to pay those bills early, and can lighten that load in your bank account before the day you fill out FAFSA. You do not want to fill out FAFSA with your account or pockets loaded with money you know is earmarked for something in the near future. I’ve told parents of students the same. You get a big fat insurance check to replace your roof or some other such issue, you get it taken care of before you file that FAFSA so that those assets do not have to be reported. Even in cases when you might easily win a professional judgement case, it’s just easier to file that FAFSA if possible after the money is spent since it is is a one day snapshot of your assets.</p>
<p>Under NO CIRCUMSTANCES is it permitted to play games like putting the money as cash under you bed or having someone “hold” your money, with a “wink, wink”. That’s fraud.</p>
<p>I have advised that students who have assets, reimburse parents for what they have spent on them, and the parents can set up an account for future expenses of the student in a joint account with parent’s name and SSN listed first AND that account listed among the parental assets. There is a fluidity between dependent students and parents funds because both parties are reporting assets, income on the student’s FAFSA. That the student is assessed 20% and the parent is assessed 5.6% over the parental excusion allowance is a fact taht many schools themselves advise students to do this. As well as most any savvy financial advice column on how to prepare for college financial aid forms. This is not advice that is fraud because of the parent-student continuum that exists, but it should not be approached in a way that smells of it. To do this sheerly as a ploy to get around the student hit on EFC is not something advised, but is something that one can do when parents have indeed been supporting and will be supporting the student. It’s one of those gray areas like not paying sales tax on out of state purchases. But if you start crowing that you are doing this to avoid the “tax” or other assessment, and it comes to the attention of those so interested, you can get hit up. </p>
<p>As for spending your money before college starts just so you don’t have to pay for college, IMO, that is not a smart idea. Having the money gives you a lot more flexibility. You have no idea what the future protends in terms of any kind of aid or future expense. It’s always better to keep your flexibility.</p>
<p>But to answer your direct question, the day you fill out your FAFSA and other fin aid forms is when you have to declare your assets. If you have bills that you can prepay, things you are thinking of getting, money to reimburse your parents, you need to do it before that day. If chosen for verification, you will likely be asked for a snap shot of your assets in your accounts as of that day you filled out the FAFSA, though you can be asked for just about anything. The way FAFSA works, is that it is that critical day that counts. You get a check the next day, it’s not included. </p>
<p>I am a dependent student. The reason I don’t put my assets in my parents name is because they said they have medicaid and they wouldn’t qualify for it anymore if they had all that money. So it’s a good idea to take pictures of my accounts on the day of filing.</p>
<p>“lol…go ahead and file on May 1st. I doubt you will get much.”</p>
<p>I called the school and they said you will only get reduced aid if you file after the deadline may 1st.</p>
<p>
</p>
<p>Selling the mutual funds just turns it from one type of asset into another. You still have the asset (in cash form), and it still has to be reported for FAFSA purposes. If you have the asset, in whatever form, on the day that you complete and sign the FAFSA, it must be reported.</p>
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<p>529 money that is used for non-qualified expenses (i.e. not school-related according to the IRS definition) will incur income taxes and a 10% penalty, but only on the earnings portion of the non-qualified distribution. In other words, any of the money that you put in will come back to you without tax or penalty. Also, depending on the state you live in, if you received a state tax deduction for 529 contributions, there may be a clawback of the deduction amount in the case of a non-qualified distribution.</p>
<p>Put your money, as much as you can, in a 529 or Roth IRA account or HSA account, if you are eligible in setting any of these up. Those qualified accounts are not hit up at the student rate of 20% by FAFSA (5.6% for 529), or at all even. Also,if you are in business on your own, you might be able to set up some sort of IRA or other such plan where you can put away your money. But do call the college in question if they use PROFILE or ask for other info other than FAFSA, how they treat qualified plan funds for students. For PROFILE schools, it all depends upon the school. They can include any assets, any formula in deciding how to determine need. If BU is the school in question, then you need to ask their financial aid officer how they treat those plans I mentioned when they are student assets. Though they will not affect your FAFSA EFC, BU can use them in their own formulas any way they please. </p>
<p>I agree with you that you are being hit very hard for earning money to pay for school, and you are being hit up harder than the average student because YOU are making the money, not the parents and you don’t have parents who can come up with the money, leaving you with that responsibility. However, those are the rules. There are niches where some students and families make out, and some where they get slammed. The formulas are not fair in every way. They never are. So I am sorry that you are being penalized for taking off a year to make money for school. With parents that are eligible for Medicaid, it’s clear that they likely cannot pay for your college. Do they already have the max assets for Medicaid eligibility? I have no idea what the specific rules for them would be, and you might want to check that out. </p>
<p>If you are applying for aid for the school year beginning 2015, you should get your assets squared away before filling out the fin aid forms, but you have to be mindful of the deadlines and remember in terms of aid, the early bird gets the work, so waiting until the last minute is usually not a good idea. The school could be out of certain funds by then. </p>