<p>My son is a rising Senior. I am a single parent, and my son has a part-time job. Close to full-time this summer, though, because he's trying to earn and save as much as possible before he heads to college next year.</p>
<p>Financial aid will be critical for us... I know about the income protection allowance, but I'm confused about what happens if he goes over that. I'm also way confused on the savings thing. I read that students are dinged for 20% of their savings as far as our EFC goes, and I'd like to avoid that. Is there a way? (Legally, of course!) I just feel like I'm missing something here -- doesn't seem right that they would penalize a kid trying to save up some $$. I'm worried that we're really going to be shocked in a bad way come FAFSA time. Any advice?</p>
<p>Thanks!</p>
<p>Open a joint account with your son where YOU are the primary account holder and deposit his savings into that. That way it will be assessed for FAFSA purposes at 5.6%.</p>
<p>But if your kiddo is working to help pay for college, couldnt that 20% from his savings be part of HIS contribution to college costs?</p>
<p>The only time this might be a bigger issue is if the student savings takes the family over the amount to receive a needed Pell grant.</p>
<p>How much would your son earn this summer?</p>
<p>
Most students could earns under $6000 without impacting his financial aid. Any incomes over $6000 will be assess at 50% to his financial aid (less aid)</p>
<p>He’s working, and will be working while in school, for his own incidental expenses/car expenses/etc. Anything not covered by finaid will have to be taken out in student loans, and we’re hoping to keep that as small as possible.
I have been reading and reading ever since I made my original post, and just get more confused. If he keeps his own checking account, then somehow that will affect our EFC? But if it’s put under my name, then it will add to my account income – which will still affect the EFC. Which, by the way, is coming out to some ridiculous number like $4500+ – which I can’t figure out. I must be doing something wrong with the calculators. My income isn’t at the poverty level or anything, but it’s low enough to qualify for the simplified needs test, and I have no assets. And barely anything in the bank.
It just seems like the more research I do, the more confusing it all is!! :-(</p>
<p>It is confusing, and I am sorry that it is and that there is a lack of assistance here. </p>
<p>If your income is below a certain level, $22K, I believe at this time, (check it out as you should check out every thing any one tells you in this matter), AND you can file a simplified tax return, you may qualify for the simplified needs test, and the EFC will then be an automatic zero even though running the numbers through an EFC estimator might give you a higher EFC. The Simplified Needs test overrides the actual calculation.</p>
<p>I do not know how student income is treated for the simplified needs test–does anyone here know?</p>
<p>Your student’s assets will not matter if the simplified needs test prevails. Nor will yours up to a certain amount though from what you are saying, that doesn’t matter.</p>
<p>If you do not qualify for the simplified needs test, the EFC will equal what the calculators come up with for your income level plus 5.6% of any assets over a personal protection allowance, plus the Student part of the EFC. The student part of the EFC will be 1/2 his income over $6K for the calendar year, plus 20% of any assets of his that he has on the day the FAFSA is filed. He, as the student, has NO protection allowance, and his assets are hit at a full 20% whereas for you, even if it exceeds your protection allowance, it’s only assessed at 5.6%. THat is why if he has some money, he should pay your for the expenses you put out for him (shelter, food, care) and you can put it in a joint account with your name and SSN first and that can be his college funds account, though itis under your name first for FAFSA reasons. Nothing sneaky about this—the colleges themselves when they offer advice outright tell everyone to have assets in parent’s name, not the kids, because of the way the formula works. So it can be his own checking account–he can get checks with just his name on it, but the account will be opened in both of your names with yours first.</p>
<p>You need to find out if you qualify for simplified needs, because a zero EFC means $5600 in Pell Grant money and subsidized loans, and maybe some other government money.</p>
<p>The student allowance is actually a bit higher, its $6130+whatever taxes the student pays (typically FICA but sometimes state income tax)+ any negative AAI (adjusted available income) from the parent(s).</p>
<p>There is no asset protection for student assets.</p>
<p>I don’t think putting the student’s assets under the parent’s name is technically legal, any more than hiding the parent’s assets by putting them under a grandparent’s name.</p>
<p>If you qualify for the simplifed needs test, parent and student assets are ignored, but parent and student income are treated the same.</p>
<p>The definitive way to figure out your EFC is to carefully work your way through the EFC instructions and formulas in the EFC Formula Guide:</p>
<p><a href=“http://ifap.ed.gov/efcformulaguide/attachments/091312EFCFormulaGuide1314.pdf[/url]”>http://ifap.ed.gov/efcformulaguide/attachments/091312EFCFormulaGuide1314.pdf</a></p>
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<p>Why? The student can give the checking acct. balance to mom the day before FAFSA is filed and she can give it back afterwards. Unless it is such a large amount that the gift tax would be triggered, why is this a problem?</p>
<p>Alternatively, the student can give the money to mom to help pay household expenses, and she can set aside an equivalent amount for student’s college & incidental expenses.</p>
<p>Thank you all SO much for your replies. I was looking at the EFC Formula Guide, but I swear you need to be an accountant to figure this stuff out. I’m not stupid, I swear – but my degree is definitely not numbers-related, lol.</p>
<p>I qualify for the simplified needs test – I make under the $50K max and file the 1040A – but definitely don’t qualify for the automatic zero EFC. My biggest concern right now is the TEXAS grant, potentially more than the Pell by a large amount if the funding is there, and definitely would make a big difference for us. It was set up by the Texas legislature “to make sure that well-prepared high school graduates with financial need could go to college.” My son meets all the academic requirements for it, but your EFC can’t be greater than $4K. </p>
<p>I keep playing with the numbers on the 4caster, but the few variables I have seem to make the EFC go all over the place. The main variable I have is child support – my on-and-off deadbeat ex pays here and there and I never know when that might be or for how long. Last year, he managed to pay pretty much all the time. This year, he hasn’t paid a cent since the end of January. Without knowing if and when he might pay again, I am having a really hard time trying to plug numbers into the 4caster. It seems so wrong that I have to fight so hard to get what my son deserves, and then get penalized for what little is paid – but that is a rant for a different board.</p>
<p>The only other variable is my son’s income and checking account. He has made a little over 3K so far this year, and with band camp starting next month his hours will drop significantly so I’m guessing he’ll end up making below the 6K-ish cap this year. He will have between $1500-2000 in his checking account by FAFSA time. It’s a “high school checking” account, so while we’re both on it, his name is first. (I called Chase yesterday to confirm that.) </p>
<p>So for that amount of money, would it still be necessary to move it to an account where I’m listed first? Or am I understanding y’all correctly that because of the simplified needs test, it won’t matter anyway? If we do need to move the funds, does that just need to happen before the FAFSA filing or as soon as possible?</p>
<p>He has worked so, so hard, and I just want to maximize every opportunity I can to help him get to school and graduate without a mountain of debt. I <em>really</em> appreciate all the suggestions and explanations so far!!</p>
<p>-gina-</p>
<p>I would suggest you use the Net Price calculator on the school website.</p>
<p>At one point the fafsaforecaster was not accurate for this year. Perhaps someone can comment…is this now OK.</p>
<p>It is perfectly legal and even recommended by schools themselves. They will tell your right out to have the student spend down their assets or reimburse parents for expenses. What the parent does with the funds is his business. </p>
<p>What is illegal and fraud, is to take out the money, put the cash in a drawer and not report it. But you can certainly give your parents the money for your expenses, and it makes sense for them to put it in a college account as they are primary in being responsible for paying for your college, and the easiest way to make the money accessible to the student is to add him/her to the account.</p>
<p>OP, what is key here is whether or not you qualify for the auto zero EFC. Maybe ask Kelsmom if there is a threshold income for your student and exactly what things you have to watch for that can quash that. I am not comfortable enough with that to advise you, as it is pretty danged important. </p>
<p>As for your son’s assets, it’s perfectly legal for him to reimburse you for expenses and for you to have an account for his college costs That YOU are paying.</p>
<p>No, I absolutely do not qualify for an automatic zero EFC – that’s an income cap of only like $22K.</p>
<p>Money owned by a minor is not the same as money owned by an adult, at least not in the states’ and IRS’s eyes. On the other hand, it’s doubtful that the IRS will track the money flow.</p>
<p>The usual solution is to have the student open his own 529 and deposit his savings into it. Student-owned 529s are treated the same way as parent-owned 529s; that is, they are assessed at the rate of 5.6% by the FAFSA formula. Just be careful to only deposit funds destined to be used to pay for college into any 529. If he needs the money for his own expenses, have him pay those expenses prior to filing FAFSA to reduce his reportable assets.</p>
<p>Please look at this thread and go to post #9. You do need to read the rules carefully. I should not have put down the $22K. That is altogether different. You absolutely have to research every bit of this yourself and read the rules from the Directions. <a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/1520215-pending-retirement-no-income-fafsa-impact.html?highlight=simplified+needs+test[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/1520215-pending-retirement-no-income-fafsa-impact.html?highlight=simplified+needs+test</a></p>
<p>You may qualify. I am not qualified to tell you one way or the other.</p>
<p>Thank you for the link – I read it again, word for word. So if I’m understanding it correctly, if I qualify for the simplified means test (which barring a lottery win between now and December 31, I will) then the FAFSA won’t even look at bank accounts – mine or my son’s – no matter if we have $500 or $50000? So he can just keep his regular checking account? I guess that’s the main thing I need to figure out… Everything else is what it is, but that’s one thing we can change if necessary.</p>
<p>Thanks again for all the help!</p>