<p>Here's my question-- as a parent of my first child applying to college next year: in terms of getting financial aid, is it better to have zero money saved in the bank, or have a decent amount of money by which we can actually pay the college tuition?? That is, I know the family's salary plays a large role in determining who gets aid and how much, but how relevant is the hard-earned SAVED money that we have in bank accounts, stocks, etc.?</p>
<p>Are we better off spending that money now so it is not a factor in determining our need or would we be stupid to spend any of it since we will most likely need it all to pay for the college tuition (assuming we do not want to take out any loans)? My S will likely be applying to top schools, and while we are aware many do not give out merit aid, my question is directed toward getting financial aid. Our salary range may or not preclude us from receiving any, but I really need to know about our saved money and whether or not we should go on a spending spree or something before we file for aid :) BTW, my husband and I are at odds on this one so any advice or knowledge from all you experienced people with kids in college already would be very helpful!</p>
<p>For FAFSA certain assets (home and retirement accounts) are protected and don’t have to be reported on FAFSA. On top of that parent assets have an additional amount of protection based on the number od parents and the age of the older parent. For instance a 2 parent family where the older parent is 50 has asset protection of around $55,000. Any assets over that only 5.6% goes to the EFC. So if you have unprotected assets of $100,000 then it would increase your EFC by 5600. Personally I think spending going on a spending spree and spending $100,000 in the hope of maybe increasing your aid by $5600, which might all be in loans, is a very bad move. Depending on your income, which has far more impact on your EFC unless assets are substantial, you may not even be eligible for much aid. If that were the case and you have blown the savings how are you planning to pay? loans?</p>
<p>The above numbers are for the FAFSA EFC. Schools that use profile have their own formulas.</p>
<p>First, you should run some aid calculators and findd out what schools will expect you to pay. Most people earning decent wages are shocked by how high this number seems to them. The calculators, many of which can be found on college web sites, can be run with your current assets and also without them.</p>
<p>While having no assets will lower your EFC, for most families it would not be worth the risk of having no cash on hand.</p>
<p>You can also look at sheltering options (moving the money from assessed assets to non-assessed assets). But be careful in doing so. There a tax ramifications to always consider. Can the money be sheltered and still accessible? What’s the opportunity cost? etc.</p>
<p>Typically, we always found sheltering worthwhile for student assets, but a toss-up for parent’s assets.</p>
<p>Now there will always be expenses associated with sending your student off to college: computers, dorm stuff, possible vehicle, etc. Make sure you take care of those expenses before you file your financial paperwork. There is certainly no need to have money reported that you will have to spend within months anyway.</p>
<p>Good Lord, no! Your son may decide that he wants to hitch hike through Europe and wind up staying in France working in a vineyard! And there you will be with perfect poverty for aid and no college student!! You might be laid off and need the cash for food!!</p>
<p>I would look at different scenarios and see if any of them reduce your EFC in any significant way. It seems to me that if you are not PELL eligible, then your aid options are not as obvious nor predictable.</p>
<p>Thank you everyone for your great ideas, tips and links (not to mention overall philosophies on the matter). Hubby and I need to sit down and sort it all out now :)</p>