So my son is already a junior in college at NYU. He receives a scholarship of around 60k that renews every year. He has learned that he is going to receive a life insurance payout of 90k this October in the form of a check. Of course the fafsa this year opens in December. Usually, this would be fine as since this is a student asset and our family income for 2022 was 54k so I believe our efc is still 0. However, I am worried about the ramifications. NYU has stated they don’t usually change these yearly scholarships but I am worried they may seeing as this is a huge asset change. Should he wait to cash the check till after December? I’m not sure if that’s possible. Does anyone have any suggestions or anything to add?
Did he receive a merit scholarship?
NYU said it is a scholarship evaluated on merit and financial need based on his css and fafsa of his freshman year.
- In general, scholarships are awarded upon entering NYU based on a combination of financial need (as determined by the CSS Profile and the FAFSA) and academic strength.
- Typically you will continue to receive the amount of scholarship you received for your first academic year in subsequent academic years provided that each year as a returning student you must enroll as a full-time student.
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To be safe, just hold on to the check and deposit it in January 2024. Just make sure he’s getting a paper check and not a direct funds transfer.
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Im very nervous about this because the insurance company says “Please note you have until the age of 21 to collect the benefit before you can be disqualified” and he turns 21 late November. Im going to call and ask but there a chance that “collect” means he has to check it. I haven’t heard of many people with this exact scenario so Im so lost.
Whether you deposit the check or not it’s still an asset that must be reported if it’s in your possession. Maybe the insurance company is willing to delay payment? Otherwise I’d talk to financial aid.
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There’s nothing much you can do, if you plan to be truthful/ethical on FAFSA and CSS profile where the life insurance payout will count as an asset.
On FAFSA this will mean he will not be EFC zero anymore. You can ask NYU for professional judgment on the one time life insurance payout….maybe they remove it as an income item, but I expect they will still see it as an asset available to help pay for college (assuming it’s unspent as of the filling day). I would also talk with NYU. You don’t have to identify yourself.
@kelsmom? I don’t think any coming fafsa changes would change how a life insurance payout is handled either?
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A dependent student qualifies for the simplified calculation if both (1) and (2) below are true:
- The student’s parents did not file Schedule 1 with their IRS Form 1040
2.OR*
The student’s parent is a dislocated worker, as defined in the Workforce Innovation and Opportunity Act (see Chapter 2 for a description of dislocated worker)
3.OR*
Anyone counted in parents’ household size (as defined on the FAFSA form and in Chapter 2) received a means-tested federal benefit during 2021 or 2022.
4.AND*
- The parents’ combined 2021 adjusted gross income (AGI, for tax filers) or income earned from work (for non-filers) was less than $50,000.
Since I would be using the simplified formula the efc would be 0 as the assets are not considered because its income based one earlier years?
You are right that the income from the payout if received in 2023 wouldn’t be shown until the next year, but it would still be a student asset( I thought your income was $54k?)
I will defer to @kelsmom, I’m not sure but the new fafsa coming in December might have a different formula than you cite above.
ETA: It looks like for the new FAFSA coming in December 2023 that the income threshold for “Applicants Exempt from Asset Reporting’ (formerly the simplified means test) is increasing from $50K to $60K. But, NYU uses CSS Profile, not the FAFSA SAI to put together their FA packages, so I expect that the asset has to be reported in CSS Profile.
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Thanks, i was citing the requirements for an earlier fafsa so i think 60k is the new number to be below but I’m not sure.
Agreed, I had just edited my post to add that
@kelsmom if the family qualifies for the simplified needs test…what is the rule regarding student income and assets.
The simplified needs test will now be called “Applicants Exempt from Asset Reporting” on the new FAFSA this Fall, and that income threshold will be $60K (plus some other rules, like not having a business/filing certain tax schedules). But that doesn’t impact asset reporting on CSS profile for NYU.
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CSS profile is only required freshman year for NYU.
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Ahhh, I didn’t know that, thanks for that info.
chrome-extension://bdfcnmeidppjeaggnmidamkiddifkdib/viewer.html?file=https://fsapartners.ed.gov/sites/default/files/2022-11/202425DraftStudentAidIndexSAIandPellGrantEligibilityGuide.pdf
Does Exempt from Asset Reporting mean not having to fill out that part of the form or that it is not calculated in the SAI? Under these new rules I don’t know if I would have to show NYU anything related to the insurance payout since there is a chance it wont be asked in the fafsa at all?
The FAFSA will not ask about the insurance payout in terms of it being income. However, any money the student has (in the bank, under your mattress, in an uncashed check) will be considered in assets. There is no asset protection allowance for a dependent student.
Honestly, this is a situation where speaking directly to a financial aid officer at the school is the only way to know what is going to happen.
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Thanks for your response. Do you believe they will even ask me my #assets since I am technically a Applicants Exempt from Asset Reporting under the new FAFSA rules? (*I’m calling the office as soon as they open tmrw but hesitant to ask them too much)