<p>Mom's inheritance was an IRA that was tranferred to her name upon my great-grandfather's death. She cashed out to pay off debt which she negotiated down. Not all debt was cancelled, she did have to pay a portion of it. For the FAFSA, there is a line that says "report other income, as reported on line such as such on your 1040". The debt that was cancelled is what she had to report on the FAFSA because she reported it on her tax return.</p>
<p>Gotcha.</p>
<p>OK-- since Mom's earned income is about 15K-- see if she's eligible for the Simplified Needs Test:</p>
<p><a href="http://finaid.org/educators/needs.phtml%5B/url%5D">http://finaid.org/educators/needs.phtml</a></p>
<p>Perhaps not because of the 'other income' issue. But if she qualifies, it can get the EFC down.</p>
<p>
[quote]
Perhaps not because of the 'other income' issue. But if she qualifies, it can get the EFC down.
[/quote]
and next year the "other income" will no longer appear on her financial statements ... it was not clear how tight money is but deferring a year may result in the financial picture allowing more aid than this year</p>
<p>Sblake, So if one has an inheritance, then if it sits in liquid form (ie:in a savings account, CD, etc.) it is then considered an asset, but not income. If it is spent on things, such as a car, computer, paying bills, it is no longer available for tuition, and it does not effect financial aid from a fafsa or profile school at all. If it is a fafsa school, one could even use this inheritance money toward the purchase of a home. Do I have the concept down now?</p>
<p>Thanks for your help. No, mom does not qualify for simple needs test. She has mortgage interest deduction.</p>
<p>Mom's income will be more than $15,000 this year, it has to be. She can't live off that, plus pay something towards my college expenses and not to mention -- no more child support coming in. Of course if she makes more money to help pay for college costs, she also gets to pay more money towards college because she makes more money. Funny how that works out.</p>
<p>join the club
the good thing is there are lots of ways students can help towards cost of their education
at the risk of sounding like a broken record
students can take out loans
earn $3,000 or more summers
get a job during the school year for books and expenses at least.
take time off and work towards college.
study their a$$es off and get a scholarship/grant
consider schools that are instate- that meet 100% of need, that offer merit.
We are middle lowish income- my daughter is attending a very expensive LAC she will graduate with approx $14,000 in debt however, she will be able to apply an education stipend that she earned during a year off, making her total debt less than $10,000
pretty good deal for a college degree.</p>
<p>No worries -- it's just life. Yes, I already work and will continue doing so and will take out loans if necessary. Have applied to 2 state schools but am worried about getting in both of them because 3 kids from my school (applied RD) have already gotten in one of them with full rides although they had lower STATS than me. </p>
<p>My mom said that taxes have to be paid on scholarships. Is this true?</p>
<p>scholarship = grant money which pays tuition is not taxable. But, for a real full ride, $$ for room and board, however, usually is taxable.</p>
<p>I thought my mom said when she was doing her taxes (software program), it asked if you received any scholarship money. Were they referring to $$ paid directly to the student, not to the school?</p>
<p>Doesn't matter who pays to whom, as long as the scholarship if for tuition and books/fees.</p>
<p>From the IRS Pub 17, page 90.</p>
<p>"A candidate for a degree may exclude amounts received from a qualified scholarship or fellowship. A qualified scholarship or fellowship is one that is for:
*Tuition and fees to enroll at or attend an educational institutiion;
*Fees, books, supplies and equipment required for courses at the educational institution.</p>
<p>Amounts used for room and board do not qualify for the exclusion."</p>
<p>Sblake--i quote nemoms post, --i am wonderin exact same thing?</p>
<p>"Sblake, So if one has an inheritance, then if it sits in liquid form (ie:in a savings account, CD, etc.) it is then considered an asset, but not income. If it is spent on things, such as a car, computer, paying bills, it is no longer available for tuition, and it does not effect financial aid from a fafsa or profile school at all. If it is a fafsa school, one could even use this inheritance money toward the purchase of a home. Do I have the concept down now?"</p>
<p>Yeah-- Clarifying-- it's an asset, but not taxable income. It still counts as untaxed income (Worksheet B) on the FAFSA during the year it was received. So better that it be in the Parent's name (max assessment about 6%) than the Student's (35% assessment), if that's possible.</p>
<p>Don't confuse income with assets. They're both counted, but they're treated much differently by FAFSA. They want to know your income throughout the previous year. But they only want to know your assets on the day you filed the FAFSA. And only SOME of your assets.</p>
<p>Liquid assets get counted (cash under the mattress, checking, savings, CD's, Money Markets, Stocks, Mutual Funds). Tangible assets generally don't get counted (cars, cell phones, computers). Retirement assets don't get counted. Home equity in the primary residence doesn't get counted (FAFSA only).</p>
<p>So if a student has a 30K liquid asset (say, a CD from grandma) on the day he files the FAFSA, it will get assessed at 35% contribution to the EFC. That raises the EFC by $10,500 above what it would have been without that asset, and decreases potential aid by the same amount.</p>
<p>Now if that same asset had been in the Parent's name, it might have been sheltered by the parent's asset protection allowance (which varies by age of parents and number in family, but is typically around 40K). And even if above that allowance, it wouldn't have been assessed by more than about 6%, not the 35% hit taken as a student asset.</p>
<p>Now, if the student takes an educational tour of Europe (6K), and buys a laptop (2K) for college, and a transportation car to get around campus (12K)-- and does it all the week after filing FAFSA, there's no change in his EFC or aid. But if he pays for all these things in the week prior to filing FAFSA (even if the europe trip is months away), his assets are only 10K on the day of filing the FAFSA. His EFC drops by 7K, and his financial aid package increases (potentially) by the same 7K.</p>
<p>Yeah-- you could use the inheritance toward the purchase of a home, and once spent, it won't be counted as an asset.</p>
<p>adding--</p>
<p>One time events like inheritances that bump income can sometimes be addressed by financial aid officers with their 'professional judgement'. They will sometimes eliminate the one-time inheritance from the income portion of the FAFSA calculation, since it's not a valid indication of income during the subsequent school year (the year for which aid is being projected).</p>
<p>Sblake, Thank you very much.</p>
<p>Out of curiousity, how are collectables looked at: ie: rare coins, antiques, artwork?</p>
<p>Collectibles are not considered assets. I suppose you could have a 4million dollar Renoir on your wall, and it would have little bearing.</p>
<p>scottaa, That is just what I thought! Isn't that unbelievable! I am sure this must happen too! Thanks for info.</p>
<p>Right-- collectables aren't counted as assets. Generally, "stuff" isn't considered an asset for purposes of FAFSA calculations. Rental property equity would be a primary exception, as would business valuation.</p>
<p>There's a line here somewhere that most wouldn't want to cross, though. Prudent college financial planning is a good thing. BUT-- I'd not want to have to explain to a college financial aid officer what happened to a student's 50K savings account (which they will be aware of because the interest earned generates at 1099 which shows on a tax return)-- by saying that the student bought a fine art painting. I suspect that wouldn't be received favorably in terms of the aid offer, rather,it would be perceived as an attempt to game the system unfairly.</p>
<p>On the other hand, students do have reasonable expenses, and many students to purchase cars, laptops, and the like in preparation for going to college.</p>
<p>What a helpful thread! So here goes a new question. My mom just cashed out a Vanguard account that my grandmother had for me, and there's another one for my sister who's in 10th grade, which was her gift to us for college. However, it had gotten as high as $9,000, but dropped to $7,700 with the stock market hits in the last year. The question is: should my mom pull my sister's vanguard out as well as mine, and invest it either in CD's or in IRA's (nice taxes deduction, and they say she can then pull it to pay for my sister's college)? Where would the best place be to hide the $ from the FAFSA? My money I expect to spend about $1,800 a year for transportation and books until it runs out.
Thanks...</p>
<p>Whether or not it makes sense depends upon some different factors. Whose name is on the mutual funds? Is your name on them? Your grandmother's? Your mom's? If your name is on them, are they custodial accounts? UGMA or UTMA? Give us more info so we can make in informed recommendation.</p>
<p>The funds say Mom, Custodian, for (kid's name). They are Vanguard Value Index Fund, UTMA. My mom cashed mine 2 weeks before I turned 18, and so far she just deposited the check into her savins account so it could clear (we're from Puerto Rico and mainland checks take forever to clear). For me she's thinking of buying 6 month or one year CD's in the @ 1,800 amount I will spend every year. In whose name would it be best to place the $, hers or mine? MY sister's Vanguard hasn't been cashed yet.</p>