<p>I'm working this summer and saving up some money for school. I live with my single, low-income, mother. I qualify for a lot of financial aid because of her income. I know that I receive a $3000 income protection allowance, but I don't get an asset protection allowance like my mom does. This means that if I keep the money I've earned then it would increase my EFC for the next year. Is there a downside to giving her my extra cash to keep for me before I file my next Fafsa, so that it won't be assessed at 20%? (she falls well below the limit of her asset protection allowance) Is it even legal? The amount would be below the $10,000 gift tax limit, so the transfer wouldn't be taxed would it? Thanks for your help, let me know if I need to clarify anything!</p>
<p>instead of asking your mother to hold your assests (which I am not sure is really allowed) have you considered giving it to her to pay for her monthly expenses? She would then, presumably, have a similiar amount to contribute to your college funding?</p>
<p>for example -- you earn $5,000 this summer. you keep $3,000 (or whatever is the income protection allowance amount). You give the additional $2,000 to you mother who uses it to pay a couple of car payments, get the washing machine replaced and have the dog spayed. Then, in August and February -- she gives you $1000 more than she is expected to (or planned to).</p>
<p>just an idea.</p>
<p>I don't think it's illegal.</p>
<p>i don't think it is illegal -- I am just not sure how FA offices look at it. Most likely they don't care to look at it at that detail.</p>
<p>goldendag -- one thing you may not have thought of -- you will have to declare your income when you file FAFSA, regardless of what you do with that income or who "holds" it. If you make more than $3000 -- they will expect you to use it to pay for college and deduct 50% of the amount from your EFC. (check the income protection allowance -- it may be $3250 next year, I can't remember). so if you earn $6000 in one year, your EFC will increase by $1500. It is still a good deal -- better to earn money rather than borrow.</p>
<p>if you still have some of that money in savings, they will also expect any savings that you have to contribute to school costs. It is the savings that you have in the bank on the day you file the FAFSA that counts.</p>
<p>hsmomstef - Yes, I understand that anything over the income protection allowance is assessed at 50%. What I was trying to avoid was the second assessment of my assets at 20%. I'm only using the financial aid that comes as grants and subsidized loans. (I'm trying not to accrue any interest) This means that if I don't need the money I make this summer, it can earn 5% in an online savings account. The goal of this is really to save up money for my 5th year of schooling, which will undoubtedly be more difficult to finance. Thanks for your ideas!</p>
<p>The only suggestion i have is that you use it towards any costs you have so that you have no money in the bank on the date you file the FAFSA. don't forget -- you can always pay your rent, car payments, insurance payments, etc ahead of time (giving you a positive balance with them -- and zero in your account for FAFSA).</p>
<p>goldendag - depending on how low your Mom's income is you may not have to worry about where the assets are held. If her income is below $50,000 and she files a 1040a or 1040ez tax return then you should qualify for the simplified formula where assets (yours or hers) are not considered when calculating the EFC. If her income is below $20,000 and she files a 1040a or 1040 ez you will get an automatis zero EFC.</p>
<p>hsmomstef - A good suggestion, I was considering paying my rent ahead of time, but I would rather earn interest on the money.</p>
<p>swimcatsmom - Her income is below $50,000, but she itemizes because she pays so much interest on her mortgage. This means she has to file a regular 1040.</p>
<p>While you've all offered some good suggestions, it seems like no one has found a fault in my scheme?</p>
<p>FAFSA will want to know about your acct balances on the day you file FAFSA. If the balances are 0, then theyre 0. Keep in mind the online banks you are saving will report the 5% interest you earn on a 1099. This interest is taxable income. If you are selected for verification, you will have to send in fed tax return, W2s, 1099,etc. An aid officer may note the 1099 income and ask what happened to the money in the savings acct. If its been legitimately spent, okay, but just giving it to your mom to hide it (my choice of words) might be interpreted as fraudulent. You may want to reconsider hsmomstef advice above.</p>
<p>It's just as easy to spend that money, it's not a huge sum.</p>
<p>In addition, since you are teenager, nobody expects you to be frugal with money or not indulge in electronic toys, I don't think they will ask for receipts either. Here is the list of things that teenager can spend money on:</p>
<p>1) DELL Laptop - $900-$1000
2) Plasma TV - $2000 - $3000
3) Iphones - $600
4) Louis Vuitton purse - $2000(For your girl friend if you are a guy)
5) Used car $2000 - $5000</p>
<p>I mean the list is endless. It's different if the amount is bigger than $10K.
Note: I'm not suggesting buying those stuff, but the list above proves to you that you can spend money very quickly.</p>