should I move my money around?

<p>Hi everyone,</p>

<p>I'm an undergrad at a private university where I currently receive a good chunk of need-based aid. Right now the money we use to pay the bulk of my university bill is in a savings account under my parents' name, but I was considering moving that into a high-interest savings account under my name so that it can earn some decent interest while it sits around. However, I'm afraid that if I increase the amount of money under my own name, our expected family contribution will go up. Is this true? Any advice? Thanks!</p>

<p>Don't put it in your name or 100% will be considered toward your education finances next year. If in your parent's names, I think it's about 33%.</p>

<p>You should use an online EFC calculator to get the exact amount. Just plug in the figures under each scenario.</p>

<p>Good luck!</p>

<p>Something does not ring true here. Whose money is it, really? Why can't the parents move the money to a higher interest account in their names? How does the student get to make the decision, and have the freedom to change the name on the account to his own?</p>

<p>Do you have a sister or brother you can trust? Put it in their name</p>

<p>Thanks for the help--I thought that might be the case. We'll probably just leave things as they are, seeing as I graduate in another year anyway. (And true, my parents could set up a high-interest account themselves, if they really wanted to.)</p>

<p>Your parents get an asset protection allowance (typically around 45 - 50K, exact amount can be determined from the FinAid calculator, and depends on age of older parent and number of kids); money in savings or checking accounts below that amount doesn't get assessed. Above that amount it gets assessed at about 6%.</p>

<p>YOU, however, have no asset protection allowance. The FAFSA formula counts every dollar of liquid assets (cash, savings, checking, investments) as available for college, and assesses it at 35% each year (changing to 25% in '07).</p>

<p>So-- let's say your family has 20K in a savings account earmarked for your college. If in your parent's name, it won't get assessed at all unless they have about another 25K of liquid assets. BUT if you transfer it into your name, FAFSA will add 7K this year (5K next year) to your EFC, and that will reduce your potential aid by a like amount.</p>

<p>If at all possible, don't save in the student's name. Exception: 529's in the student's name are exempt from FAFSA calculations, effective 2006.</p>

<p>Say a family had an account in the child's name and then 6-12 months before filing the FAFSA in January, they simply closed the account. Does the IRS/FAFSA check bank records/statements a certain amount of months before the FAFSA was filed ? Do they check 6 months back, for example ? And if they do, and it turns out the student had 10,000 in the "closed" account 7 months before, can they do anything about it? Also, are ALL FAFSA applications verified by federal/state govt. agencies (ie. IRS), or only the ones that look fishy ?</p>

<p>You can close the student's account. But the asset remains in some (reportable) form. So you'd still have to report it.</p>

<p>Can you commit fraud? Yes.</p>

<p>You can also rob banks. Or write bad checks. Or burglarize your neighbor's house.</p>

<p>I would imagine it's like the IRS. Fishy ones are certainly audited, and then some additional percentage of nonfishy ones are randomly selected for auditing. The penalties for fraud and cheating are so high, including direct penalties like fines and prison time, as well as indirect penalties such as revoking admission and loss of all financial aid, that the risk of cheating is a deterrent for most people unless they are criminals to start with.</p>

<p>im not really, really sure about this, but from what i remember the FAFSA practice forms asked about assets/savings CURRENTLY in the parents and students names and not how much was in the bank x months back, so i guess they don't check your bank records, etc. x months before you filed in january ? I mean, if u closed a 10,000 dollar account 2 months before, and you're hiding it in your mattress, realistically, you DO have that money, but according to the bank, it has been withdrawn, its gone. So do the college finan aid offices/IRS/FAFSA people say "hey, what the heck did you do with that 10,000. we know you didn't spend it in 2 months, so where is it?" (obviously, it could have been spent already, but...). Can they be so nosy like that ?</p>

<p>YOu don't get it.</p>

<p>You have to report the money you're hiding in the mattress.</p>

<p>Otherwise you're committing fraud. And can lose all aid, and lose any acceptance. And maybe end up in jail.</p>

<p>What gooduniforme is proposing would be an easily detected fraud. The 1040 shows bank interest income of $xxx. But no investments, bank balances or cash are reported on FAFSA. It doesn't take a genius to know this should be questioned. The Dept of Educ guidelines for FA officers specifically instructs them to question a situation like this. So you get a letter saying, "Explain." Then what do you say? Lie and commit another fraud, or tell the truth and lose your FA?</p>

<p>So I'm new to this stuff, but if you keep all your money in a checking account, does the college account this into financial aid? This is kind of a question for myself, sorry, but I don't really care about the interest you get on a savings account, as I have only had $XXX money in it from the start.</p>

<p>I understand what you are saying here but, what if one were to treat it as a gift to a family member. It would definately show up on 2006 tax return but it seems one would have a legitimate out/explanation with fafsa.</p>

<p>vu-press:</p>

<p>The money in your checking account gets reported on the FAFSA as an asset. If it's a student asset, and the student has looming expenses, best to spend that money down before filing the FAFSA, so it doesn't adversely impact your aid.</p>

<p>bkb:</p>

<p>I suspect that a financial aid officer would see this 'gift to a family member' by a student shortly prior to filing for financial aid, to be a dodge to avoid declaring the asset. After all-- how often does a 17 year old who is asking for financial aid have have the wherewithall to loan significant $$ to a family member. Don't know if they'd consider if fraudulent, or just deny aid, but I doubt that they'd buy it.</p>

<p>Consider instead pre-paying some expenses, converting liquid assets to non-reportable assets (like a computer, or a car), or look into converting student assets to 529 college accounts, which apparently aren't reportable on FAFSA effective this year. These are all clearly legal strategies that won't get you in trouble should you be asked to explain.</p>

<p>Thanks sblake7,
I like paragraph 3 the best. The asset I'm referring to is mine not the students. Enough to cover one years tuition at a top 15 private university. The 529 sound like the route to go. Are there any limitations as to the amount? I have an appointment set up w/a tax accountant next month to explore other options and appreciate your thoughts as well.</p>

<p>I just remembered that this stuff would probably go towards Student Contribution right? In that case my college lets me use outside scholarships towards that contribution before subtracting from the university grant.</p>

<p>Unfortunately, the university my son is going to doesn't.</p>

<p>bkb: Each State sets max contribution limits for their 529's, generally pretty high (over 200K). Pretty complicate stuff-- research it well before you jump. Two pretty good articles here:</p>

<p><a href="http://www.savingforcollege.com/intro_to_529s/index.php?general_faq_id=4%5B/url%5D"&gt;http://www.savingforcollege.com/intro_to_529s/index.php?general_faq_id=4&lt;/a&gt;&lt;/p>

<p><a href="http://www.savingforcollege.com/top-...p?top_tip_id=7%5B/url%5D"&gt;http://www.savingforcollege.com/top-...p?top_tip_id=7&lt;/a&gt;&lt;/p>

<p>If web researching, make sure you're reading something recent that includes the 2006 changes to the law.</p>

<p>
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I just remembered that this stuff would probably go towards Student Contribution right? In that case my college lets me use outside scholarships towards that contribution before subtracting from the university grant.

[/quote]
</p>

<p>At most colleges this is not the case as usually outside scholarships firt reduce the self help portion (work study and student loans) then the reduce the university scholarships and grants usually leaving the EFC untouched.</p>