The key loophole for assets is that if they are in a 529 account owned by a dependent student, they are considered parental assets for financial aid purposes and only considered available to pay college costs at a 5-5.64% rate (IM & FM) compared to 20-25% for student assets (FM & IM). Get as much as possible of that insurance payout into a 529. (ETA: for CSS reporting purposes for NYU, if required).
As others have mentioned, the income won’t be reported until a subsequent year and might not have to be reported at all. For a one-time payment, if needed, you can also likely get a professional judgement to avoid the potential double-whammy of increased income and assets for the payout.
If you do fall into the Assets Exempt from Reporting category, FAFSA will not ask for your assets, including the insurance payment. In that case, the payment will not affect aid.
Once you are exempt from asset reporting, the FAFSA will not ask for your or your child’s assets. The fields are ‘grayed out’ and the skip logic will just take you to the next section.
One of my daughters had some savings toward the end of college, and some of it was from student loans that wouldn’t have been included so I had separated all the amounts from her income, but it never asked for any assets or income for her.
Usually the check from an insurance company will be good for 90 or 180 days. They would not give him a check and immediately require it to be cash before his birthday in Nov or forfeited. Once the insurance company accepts the claim, it is no longer their money. If he never cashed the check, the company would have to attempt to pay him or the money would escheat to the state. It’s no longer the insurance company’s money.
Thank you this is all good info. I think the state i live in requires assets regardless of eligibility for the simplified version so I feel im back at the start.
Does your son have a grant from the state? If so, and if they do require asset information, the state grant would be affected - but it’s not going to be used in the FAFSA calculation. In other words, the fact that you have to report assets won’t affect the Student Aid Index (new term for EFC) that NYU receives.
Hi thank you for following up. I’m more worried about NYU deciding to take back the aid they gave him or decrease his institution aid based on the asset he would report. I’m not sure does the school just receive the sai number or do they also receive specific financial aid?
They receive all information reported on the FAFSA. If assets are reported voluntarily (which it would be if you are only providing them because your state requires them to calculate grant eligibility), NYU is not likely to look at that. Aid calculations are typically done by computer. If you want peace of mind, it’s good to discuss it with the aid office to know for sure.