Question about student assests

Paying for College
1

So,

I come from the lower middle class, around 60k income. I have worked every summer and saved money in a checkings account. I know that I will need a new computer, better car, and other items for college. I am a senior applying to colleges. Please check any of my other threads for any stats, but I have a 30 ACT and a 3.99 ACT with a few honors and ap classes, plus I am rural with a class size of 60.

Is there a better way to have the student assets show up. I currently have around 10,000 personally saved up from hard work that I earned myself, and I really don’t want that all to count against me. I know that would be around 20% or 2000.

My parents have smaller retirement accounts, but not really anything in savings (10,000 or less. I have not inquired too much about that)

Could I shift my checkings acoount amount to another relative or under my parent’s name. I am just curious about this. Would it be better to just buy a better car and laptop and such before fafsa? I don’t really mean to cheat the system that much, but I also don’t want my good saving habit to work against me.

2

Yes, you’re right . The only honest way to do this is to buy the stuff you need sooner to spend down the savings before you file the FAFSA.

Your parents may be able to open a 529 with you as beneficiary with some of the money too, and I believe that will be ignored for the FAFSA, but of course that money does have to be spent on actual college expenses.

3

Yes. I do not want to cheat the system or anything, but I also do not want to be disadvantaged because I decided to save for college, since my parents expect me to pay for it.

Could I move it to my parent’s assets? Would that look questionable? I believe I already have an account which is managed by them. I trust them with my money of course.

4

You can buy what you need. You can put the rest of the money into a 529 and then it would get treated as a parent asset.

5

You mean, you only want to cheat the system a little?

No. Any 529 opened with student money will be considered a parent asset; it will not be ignored by FAFSA. Also, the student will be the beneficiary of the account as well as the legal owner, either outright or through a custodian (if the student is not yet of legal age).

Do you mean make it look like a parent asset to get better financial aid treatment? Unless you’re doing that through a 529 account, that would be fraud.

6

This student is asking if he can have his money count as a parent asset. The simple answer is yes, if he puts it into a 529 account. There is nothing wrong with this question. And the student is not suggesting he wants to otherwise “hide” this money.

I will ask…and I know it’s not what the student asked…why do you need a car? Will you be commuting to college?

7

He did say that he doesn’t really mean to cheat the system “that much,” implying that a little bit of cheating is acceptable.

8

But money in the 529 gets considered at the much lower parent rate than the student rate, so, yes, it’s a good idea to move money you’re going to use for school anyway into it.

9

Bottom line - put the $10k in a 529 plan account, or partially in a 529 and the rest into a Roth IRA (Roth IRA: up to your 2015 W-2 earnings or $5,500; whichever is smaller).

10

^^and how does that get him a car or a laptop when he needs the money for those, which is what he said he was saving for? I’d buy the laptop during the Holiday sales, and maybe the car too if the timing is right.

It may not make much difference. If your parents have income of about $60k, that might be just enough to keep you out of FA for public schools. your $10k in savings might mean you are required to contribute $2000, but you’d probably have to do that anyway. At a school like Harvard, you are going to have almost everything covered. At a public instate, there isn’t much need based aid for the middle class.

11

Buy the things you need, then put the rest in a 529

If his parents have little to no savings, the 529 acct may not end up counting at all.

12

That was my point. My parents do not have much in savings, and I do not want to cheat the system. If I am going to use the money to pay for college, I just want to spend it or use it wisely. I did not mean to give off the wrong impression.

13

If there are some things that your parents have been paying for (gas money, car insurance, cell phone, new winter wardrobe, etc.) that you could have been paying for, it is perfectly fine for you to reimburse them for those expenses.

Do run the Net Price Calculator at the website of each of the places on your list using several different scenarios (all the money still in your account, all the money in your parents’ account, some spent, some each place, etc.). It is entirely possible that what you have in your accounts won’t matter at all for the estimated aid package.

14

A lot of college students do not own cars. If you are struggling to meet your college expenses, and not planning to commute from home, consider not even taking a car to school. The cost of the car, gas, insurance, and maintenance eats into money you could be spending on tuition, room, board, & textbooks.

15

And once the money is spent on school expenses, it won’t count for next year. Maybe you can apply for some local scholarships (Rotary, American legion, etc) in your town to help with the first year.

But like others said, if you worked and saved that money to help with your college expenses, put most of it in a 529 and it will be legally considered a parent asset.

If you need to commute to school and need a better car, then spend some on a car. But only if it is needed and doesn’t add other unnecessary expenses.

The money you contribute to college from your savings will enable you to work less your first semester and possibly lessen the debt load.

16

Spend it on stuff you know you will need down the road - the computer/laptop, new phone, car, etc, before you fill out the FAFSA.

Also, reimburse your parents for things they have paid for on your behalf - cell phone, clothing, gas, insurance, etc.

This moves the money to their accounts, and it is theirs. If they wish to help pay for your college expenses, it will be at their option. They would be within their rights to minimize their own assets before the FAFSA application - they can use it to pre-pay the winter’s oil tank, etc. But you are absolutely correct in understanding that the schools generally expect you to use virtually 100% of your assets, but only 20% of family assets.

I would avoid transferring it to other relatives, as IMHO, that is cheating if the money really still belongs to you.

Note that some schools require more than just the FAFSA application, they can also require much more detailed questions. Several schools will ask about when a vehicle was purchased, and for how much, when they calculate FA. One FA officer explained to us that they do this because they don’t think it is “fair” to expect them to give need-based aid to a student whose “car” is a $200K Lamborghini.

But overall, congratulations on being smart, both from your grades/scores, and being savvy enough to save for your own college expenses.

17

If your income is right around $60 k and you are a family of 3 (?), then I don’t think you will be Pell eligible, or just barely.

I just did the FAFSA 4caster for a family of 3 with income of $60k and it came up with an EFC of over 5,000.

https://studentaid.ed.gov/sa/fafsa/estimate

18

,<<<
That was my point. My parents do not have much in savings, and I do not want to cheat the system. If I am going to use the money to pay for college, I just want to spend it or use it wisely. I did not mean to give off the wrong impression.
<<<

You can honestly put all that you want into a 529 account (do that before you file FAFSA), and since your parents have few assets, either the money won’t count at all, or it will count little. That’s not cheating. It’s following the system that was set up. It’s fine to do that.

@AverageJoe22

19

It is not cheating the system to do financial planning. People do tax planning all the time to shield income and pay less in taxes. I’ve read a few articles on doing FAFSA planning in 2015 to get better FA for two school years because 2015 income will be counted twice. If AverageJoe’s family could figure out a way to earn under $50k for 2015 and qualify for the Simplified Asset test on FAFSA, great. It’s perfectly legal, his assets wouldn’t even count. I spent a little time last December trying to figure out if it was better to pay for the spring tuition in Dec or Jan for the better tax benefits. Planning is a good thing.

The OP asked a question of what to do to maximize his need based financial aid. There is nothing wrong or dishonest about planning, either for paying taxes or getting the best financial package.

20

No, it is not cheating to plan properly, and I support @averageJoe22 in trying to get the information he needs to make a good decision.

I was concerned, though, since OP had stated

He seemed to understand that this is questionable, because he added

. Some of us find these last 2 words, “that much” troubling in this context.

However, when he clarified

it made it clear to me that he is still in the information gathering stage, and it is completely appropriate to be informed prior to taking action - and in his described circumstances, the potential impact on his financial aid for not planning appropriately can make a huge difference ($2,000 if counted as parent assets or 529, vs $10,000 if counted as his own).

I just wanted to clarify this as there will likely be lots of future visitors to this thread, and I don’t want to give anyone the impression that I approve of moving assets to a relative’s name - to me THAT is cheating. But I am not naïve enough to think this doesn’t happen.

Colleges will certainly not advise students to move money between a student and a parent, or to a 529, nor to use up funds like the computer purchase, etc. before filing the FAFSA. In my limited experience, many HS guidance counselor’s won’t either. These are legitimate planning steps that too many kids don’t know about, most likely if they do find out about them, it is too late as they have already filed FAFSA.

The OP should be applauded for planning, and asking about it while there is still time to take action.