My mother is on disability and has been recently offered a settlement by her private disability insurance company (rather than getting a monthly payment for the next 13-14 years). We’re wondering how this would affect the FAFSA. Has anyone been through this before? Her AGI would probably still be low (I think it was around 3k for the 2015-2016 year), because the only other money she receives is social security (but not SSI). I’d assume this would be counted as an asset?
My mother talked to an attorney, who told her to talk to an accountant or someone else who deals with finances (I can’t remember who). My mother asked that person today and he suggested to ask the school (UAB). We talked to them and the first person didn’t know how it’d affect FAFSA, while the second person said it’d probably be counted as income since it’s a relatively large amount ($100k+). My mother is only interested in the settlement because of our financial situation right now, so the money wouldn’t be able to go toward my tuition at all.
EDIT: She’s also interested in it because the company limits the amount of money we can have coming into the house. For example, they would reduce her monthly payment if I got a job.
She needs to meet with an accountant, and find out whether or not that kind of settlement is better for her overall financial situation, not just relative to the FAFSA. My bet is that the insurance company is pushing it because they will save money, and she will get less. But she has to do the math.
You also need the details about how income from other family members affect the monthly payment. Presumably, you will get a job one day. How far away do you have to move for that to not affect your mother’s payments? If you have a student job on campus to help pay for your books, does that count?
To shelter money from the FAFSA a pay out would probably need to be put into a retirement-type acount such as an annuity. Those are tricky investments and she needs professional help with deciding about that. If the money ends up in general savings, it will be considered to be available for your education.
Thank you. And yes, that’s what they’re doing. Nothing’s final yet because she thought their original offer was too low. She spoke to a financial adviser earlier today, but I’ll tell her to speak to an accountant.
It’s just the two of us; my brother doesn’t live with us and is going away to graduate school this upcoming year anyway. A job on campus (through work study) would be financial aid, so that wouldn’t count, but I do believe that any non-work study job likely would count.
So if it’s in savings, do you think it would be considered an asset instead of income? That’s really what we’re trying to figure out.
It’s all really confusing. No one really seems to know how it would affect the FAFSA. We called the hotline and they agreed that it would be “more of an asset” and that whether it needs to be reported or not would depend on which school I’m attending. However, someone at the school said it would be counted as income, so I’m not sure if they even know the answer.
I can think of a lot of things that need to be clarified while your mother works toward her decision. I’m sure you have more questions too.
How does FAFSA treat the money she currently is receiving? How much of that is treated as available for your college expenses?
How soon are you starting college? This fall? Next fall?
How, exactly would any income YOU earn affect what your mother receives? Is it a dollar-for-dollar cut in her payments? What is the rationale for those cuts? Is there any room for negotiation considering that you will be a student, or do they expect that you should support her instead of studying?
What are your grades and SAT/ACT scores like? Any chance that you could land a full-ride or nearly full-ride so that you don’t need to be making any money at all?
The current money she receives from this disability company is counted as income. Her AGI is really low, about 3k, so according to FASFA, I should be receiving the full amount of pell grant.
I’m actually a freshman in college right now. My senior year in high school was terrible; I was diagnosed with mono before school started that August and ended up having to be homeschooled/online schooled again because of that. We also spent a good deal of that year bouncing from family members’ homes and sleeping in the car, so I ended up not even being able to deal with applying to colleges or scholarships during that time. I missed out on a lot.
The income thing is weird. Basically, they will only allow her to be paid a certain amount each month. It’s technically around $1400, but she’s paying them back $1000/month because they said she owed them based on social security payments we received during my senior year. So once she’s done paying back the money, say I earned $400 a month - the company (The Hartford) would likely then reduce her total payment to $1000 a month.
Certainly there must be some cutoff when your income doesn’t affect her. Is that when you are not a dependent, when you turn 18 or 21? When you move out? What is the criteria for that. Surely at some point your earnings are not considered.
It seems that the FAFSA could be counted as income the year you get it, and an asset every year. Surely it will be counted as an asset.
How is her income only 3k if she is getting payments and the payments count as income? I’m probably getting in too deep but those are my thoughts.
As far as I know, it’s while I’m living with her. I have health issues of my own though, so I won’t be moving out anytime soon.
Yes, I agree that it would make sense to be seen as income the first year and an asset every year after! But we keep getting mixed answers. We’re waiting to see what the person who prepared her taxes thinks about the whole situation.
Honestly I have no idea how the AGI ended up being so low. I thought it was a mistake, but I transferred the information using the tool so it must not be? Since social security isn’t counted as income, the $400 she gets a month from the private disability insurance company is her only real income.
