<p>So a while back, like 2 years ago, my parents had a problem with Chevy Chase where they had their account frozen by the bank for a while. Once they had it fixed they took the money out and put it into my bank account at a different bank. I didn't care since I'm going to a community college and wasn't planning on filing FAFSA. Now that I plan on transferring, I went to a FinAid night and they said that they weight the students income/assets more than the parents. I didn't know this until now (first gen college student) and about a month ago we had put the money (40k) into a 3-year CD. I was using the fastweb QuickEFC calculator and it asks for the older parent's income.. In my case it's my Mom. She's 2 months older than my dad and she made like 10k AGI but is now unemployed (got laid off). I made 12k AGI and my Dad made like 45k AGI. My siblings (we're 7 family members) do qualify for free lunch and both my brother and I will be attending college, so when my EFC estimate came out to 12k, I was shocked. My assets are not mine. Is there anything I can do? I don't know if CDs can be transferred to another person, but if they can be would this be the best thing to do? Or will it be too late now? Thanks for the help!</p>
<p>I’m hoping Swimcats will respond. Actually…those assets ARE yours in the eyes of the finaid (and tax folks). They are in YOUR NAME. </p>
<p>My question…what will your parents’ adjusted gross income be for 2009? If it is below a certain amount, and your family files a 1040Ez or 1040A…you might be eligible for the simplified needs test. You already state that your family gets free/reduced lunch which is also one of the “tests” for this. I believe (but I am NOT THE EXPERT ON THIS) that if your family qualifies for this, your income and assets are not reported at all.</p>
<p>I know in their eyes the CD is mine and that’s my main problem. It’s ont. x_x </p>
<p>My parents AGI together this year will be around 55k. What I put on the first post was the estimate for this year since we looked at their last paystubs.</p>
<p>If I manage to get the CD transferred to my Mom, is FinAid and the taxs folk gonna still consider it mine since it was in my name this whole year?</p>
<p>Assets are reported as of the day of the filing of the applications. So…transfer the money out of your name. I don’t know if the finaid folks will look back to previous years. </p>
<p>Question for the “tax experts out there”…will this student have an issue transfering $40K to her parents or will this be considered a “gift”.</p>
<p>You have two factors causing the high EFC. First is your income. For 2009-2010 school year a dependent student has @ $4500 (plus a little more in allowances for taxes and FICA) protected income. Anything over that 50% goes to the EFC. So your income of $12,000 has an impact of probably around 3500 on your EFC. Then the assets in your name. 20% of a student’s assets go to the EFC. SO the $40k is increasing your EFC by 8,000. The parts of your EFC created by your income and assets are not divided between you and a sibling in college. If your brother does not have as high an income or have assets in his name then his EFC will be much lower.</p>
<p>
Simplified needs causes all assets (*not *student income) to be ignored in the EFC formula. But the parent income cut off for the simplified needs test is <$50,000. It sounds like your parent income is above that. The special calculation that ignores assets ad student income is the automatic 0 EFC but that requires parent income of below $30k. That is combined parent income - I am very confused by your statement that “I was using the fastweb QuickEFC calculator and it asks for the older parent’s income.” - FAFSA requires both parents income, not just the older parent. So it is their combined incomes that are relevant here. Based on your parent income it does not sound like you qualify for either simplified needs or automatic 0.</p>
<p>You have to report all assets as of the day you file FAFSA. If these assets are in your name on the day you file then as far as FAFSA is concerned they are yours so will have an impact of 8,000 on your EFC. If they were in your parent’s name they would probably have no impact at all. Parents have a certain amount of protected assets based on the number of parents and the age of the older parent. Assuming your older parent is in their 40s then $40k would fall under the protected asset allowance for a 2 parent family.</p>
<p>Thanks for clearing that up. I was using this: [FinAid</a> | Calculators | Quick EFC Calculator Results](<a href=“http://www.finaid.org/calculators/scripts/quickefc.cgi]FinAid”>http://www.finaid.org/calculators/scripts/quickefc.cgi) and it asked the age of the older parent then would ask for parent income, not of combined parent income so I wasn’t sure. I guess on Wednesday when I’m done exams I will go to the bank and see what I can do to get that CD onto my parent’s name so it won’t affect me. I’d be okay with a EFC of 4.5k since we can manage that but 12k is just too much.</p>
<p>Vela, a caution…view your EFC as the MINIMUM your family will be paying out of pocket for your college costs each year. Need based aid policies and awards very from school to school. There are many schools that do not meet full financial need…meaning there will be a difference between the Cost of attendance minus your financial aid…and your EFC. </p>
<p>I’m going to make up an example to explain what I mean.</p>
<p>If the cost of attendance at a school is $25,000 a year…and the school says your EFC is $5000, that would seemingly leave a balance of $20,000. BUT for schools that don’t meet full need, there is no guarantee that the school will give you ALL $20K of that money. You might be eligible for part of a Pell grant with your EFC (I’m not sure about that…but I think you would be eligible for a small amount per year with an EFC of $4200). BUT that would not equal $20K. The school might give you a small grant, they might give you work study, and you WILL be eligible for a Stafford loan. Even with all of that, there might not be $20K in aid.</p>
<p>NOW…if you go to a school that meets full need, the scenerio would be a different one.</p>
<p>A couple of concerns: 1) if you’re only 2 months into a 3-year CD term, you might not be able to access this money and/or you might have to pay a penalty; 2) you can’t gift $40K to your parents without running into the $13K/year gift limits imposed by the IRS and 3) if you’re under 18 the bank might not allow a change in title from a custodial account to an adult’s account. For 1) you’ll have to see what the bank says, for 2) you can split the gift over 2 years (2009 and 2010) and for 3) it sounds like you might be older than 18 so this might not be an issue for you.</p>
<p>thumper1: In your scenario, does the Stafford Loan bridge the gap between your EFC and the workstudy/grants the schools give you? Or only a portion? So like you said, say the remainder is $20k and you get $10k in work-study and grants, can you get the a Stafford loan for $10k?</p>
<p>swimcatsmom: Yeah. They explained it at the financial aid night I went to. I plan on staying in-state so FinAid should be decent and I was just planning to get loans for the rest. </p>
<p>vballmom: Hmm. I guess I’ll just have to check with bank. I looked online to see if CDs can be transferred but found nothing. If they can be, would the 40k be considered a gift? How about if I made my bank account joint with my Mom? Would the assets be considered mine or hers? (for FASFA purposes)</p>
<p>Thanks for all the help thus far. I wish I would’ve thought of posting this sooner.</p>
<p>I don’t believe you can take out a Stafford loan for $10,000 in one year. The only way you would be eligible for that amount in Stafford loans is if your parents applied for a PLUS loan and were turned down. </p>
<p>Even IF you got a $10K work study award (which is VERY VERY unlikely…a high award would be $4k)…it is unlikely that you would be able to earn that much money working during the school year at a work-study job. Many of these w-s jobs pay a bit more than minimum wage only. Some pay higher but not THAT high. My daughter has a w-s job that has amongst the highest number of available hours on her campus and IS the highest paying…she usually can’t use her $4000 award up during the school year.</p>
<p>The maximum Stafford depends on your year in school. If you are a transfer student I am assuming you are not a freshman. For a sophomore the maximum Stafford is $6500. For 3rd year and above the maximum is $7500. The cumulative maximum for a dependent student is $31,000.</p>
<p>You will not get $10k in WS. WS is a campus based aid (meaning the school is give $xxxx in WS funding and has to try and divide that amongst all its eligible students) with limited funding. The annual max WS at my daughter’s school is $3400. Maximums may vary by school very but I would not expect it to be much higher than that anywhere.</p>
<p>Does your state have need based grants? With an EFC of say 4000 you will not be eligible for much in the way of federal grants. The current cut off for the Pell grant is an EFC of <4617. With an EFC of 4000 you would be eligible for some Pell, but only around $1350 (2009-2010 figures, 2010-2011 are not out yet). That is probably the only federal grant you could be eligible for. Other federal grants are the: SEOG, very limited funding - my kid’s schools only award it to 0 EFC students: SMART grant, for junior or senior year pell eligible students majoring in specific subjects (mostly but not only sciences and maths).</p>
<p>Oh, so you only get either a grant or work-study? I was under the impression they’d give you like a 7k grant and a work study for like 3k.If the work-study is for 3k, does that count towards a student’s income? </p>
<p>I’ll research more tomorrow to see if the state of Virginia offers need based grants. For scholarships that require the FAFSA, can you begin applying for those once FAFSA is submitted or is it once they determine how much your EFC is?</p>
<p>Now that I know all this I’m worried I won’t be getting much aid. x___x This year I worked a lot so I could save up to transfer for Fall 2010 and actually doing that has made things worse instead of helping. </p>
<p>Sorry I’m so naive about everything. I’m one of the first in my family to go to college so I don’t really know who to ask questions and research sometimes doesn’t answer questions specific to me. Thank you.</p>
<p>You can get a grant and WS. But federal grants are pretty limited and it does not sound like your EFC will be low enough to get much. Does your school offer institutional aid at all.</p>
<p>WS income does not count against you for federal aid. It is taxable income so is included in your AGI which is reported on FAFSA. But the EFC formula deducts WS income from income before calculating your EFC.</p>
<p>Sometimes it’s easier if we were talking about particularscolleges, since then we’d know if these schools can’t meet need or they meet need with OR without loans.</p>
<p>which schools are you talking about? What is your home state?</p>
<p>I’m going to be applying to College of William and Mary, Virginia Tech and James Madison University. They’re all public and located in my home state, Virginia.</p>
<p>I went to the bank today and the lady told us our CD could be broken at the penalty of $341. Not too bad. She also didn’t say anything about the gift tax. I asked her and she said my Mom would only have to pay tax on the interest she gained. She recommend we contact a tax expert just in case, though.</p>
<p>I’ve seen this situation before. It’s not really a big deal. I had a very similar situation years ago with a local bank. After I explained to the bank president what the problem was, they released the CD with no penalty. Even if they do assess $341, that’s nothing compared to $8,000.</p>
<p>As for gift limitations via the IRS, this won’t be a problem either. Give half of it back to your parents this year, and the other half at the turn of the year. I believe the gift limitation is $13,000 per person right now. So mom & dad (2 gifts) given in two years equals total allowance of $52,000 (4 x $13,000).</p>
<p>Liquidate the CD immediately. Explain the situation to the bank and see if you can get the penalty waived. Give back 10k to your mom and 10k to your dad before Dec 31st. Give the remainder back on Jan 1st.</p>
I asked her and she said my Mom would only have to pay tax on the interest she gained. She recommend we contact a tax expert just in case, though.</p>