I am a 2nd year undergrad who has been recently getting into stocks. I fortunately was able to learn how to trade relatively quickly from people who I consider mentors. Now that I realize that trading can be an actual source of income, I would like to know if / how much my capital gains will affect the amount of FAFSA / Pellgrant I will receive in the future.
Some information that may help answer this question:
My mom is divorced has two dependents ( my brother and I)
She does not have any assets
I qualified for a Pell Grant last year
I make around 450 a week from trading
This year will be my first year I have ever filed for taxes
I currently go to a community college that costs ~$7000-8000 a year excluding grants/scholarships.
I currently have a 3.982 GPA
Another question if it is possible to answer:
I am wishing for a transfer to UofM. If my hopes of this were to happen, would I still be able to qualify for The U-M Go Blue Guarantee?
Information about The U-M Go Blue Guarantee for those who are not informed about it:
" U-M will pay full undergraduate tuition and mandatory university fees for up to four years for students:
who are eligible for in-state tuition
who are eligible to apply for financial aid
that have family incomes of $65,000 or less and assets below $50,000 (as well as tuition support for some families earning more)
who are pursuing their first bachelor’s degree "
Capital gains will be income for you on your taxes. How much it effects your taxes depends on several things. For instance, if you qualify for an Auto-Zero EFC based on your mother’s income then it won’t effect it at all. If you don’t, student income is hit the hardest of anything on the FAFSA at 50%. But, there is an allowance of $6840 that is protected, so you can make that much in a year without it counting against you.
Here is the actual formula if you want to work through it yourself.
How much do you have in assets (i.e. not the capital gains, but the total sum of your investments)?
I realize you won’t take my advice- but rapid trading for a low income kid is not a sound financial strategy. I’m going to guess your mentors have all the “basics” of a safe financial strategy BEFORE they trade- six months income in a money market account for example.
You realize that one bad week in the market can wipe you out?
If you are making $450/week at 1% weekly return (a HUGE return) that implies you have $45,000 in assets. If you are so confident in your “system” you should just compound up your gains. Then FA is no longer concern for you.
The more likely scenario from you taking these risky bets is that capital gains will not be an issue for you.
I was not aware that fafsa looks back two years. On a different note, I’ve looked up the qualifications for auto EFC On the ifap.ed.gov website it looks like I qualify. Correct me if I’m wrong, but it seems like my income has no affect on auto efc- which is a bit weird considering I could be making more than 27k AGI and receive the benefits of auto EFC as long as my mother meets the criteria.
If you qualify for auto 0 EFC based on your mother’s income, your income will not matter for federal aid. I am not sure if it will matter for UM’s aid, though. UM requires the Profile, and they consider more of the family’s situation than FAFSA does. However, the only way to know is to ask a financial aid officer at UM.
Yes, if you’re a dependent student and your parent that fills out the FAFSA meets the Auto-Zero qualification, the FAFSA just stops and doesn’t move on to assets or student info. FAFSA tries to make things simple and it’s a rare situation where the student would be making more than the parent. Now, some states still require the other info for state and institutional grants though.
The two year lookback is because they open up FAFSA in October the year prior to the school year that you would be attending and that FAFSA asks for income from the year before that. So, the FAFSA you fill out this October for the 2022-2023 school year will ask for info from 2020.