<p>What is the amount of money that a student can have in their account for financial aid purposes? Is there a threshhold amount? She doesn't have much in her account...</p>
<p>It probably doesn’t matter? I know my student savings is counted as income and affects FAFSA results and all.</p>
<p>Students do not have any asset protection. For FAFSA 20% of a student’s assets go to the EFC. If the student’s savings are in a 529 account then they are treated as parent assets which are assessed at a much lower rate. The exception would be if you qualify for the simplified needs test (income <$50,000 and some other criteria) in which case all assets are ignored.</p>
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No, your savings account is not counted as income. It is counted as an asset. As an asset 20% of it is added to your EFC. Assets and income are 2 separate things and are treated differently by FAFSA. If you have income then there is a certain amount of student income protection. For a dependent student I think it is around $4700 ish for 2010-2011 school year and will increase to around $5200 ish for the 2011-2012 school year. Any student income over that (and after any allowances for taxes, FICA etc) 50% of it goes to the EFC.</p>
<p>Can anyone help me understand?</p>
<p>My child made $5,000 over the summer, will make $1,000 during the 2010 school year (work study) and after deducting “qualified expenses” from scholarship money her total 2010 income will be about $17,000. After deducting the student income protection allowance of $5200 that will still leave an income of over $11,000 that will need to be reported on her 1040 tax form. Does that mean that 50% of that $11,000 will go towards next year’s EFC? As it is she will owe a hefty federal tax bill to pay the taxes on the portion of income that is from the scholarship. Technically she only has access to the $6,000 earnings which she used to pay her portion of tuition, books and spending money for the year. The other $11,000 she never saw and was paid directly to the school for room and board which is not a “qualified expense” hence considered income and must pay taxes on this amount. </p>
<p>We are extremely grateful and thankful for the scholarship but I find it hard to believe that this scholarship will increase her EFC next year. We meet the simplified needs tests so is there a possibility that they look at the scholarship income differently than actual income? Am I missing something in the filing of the federal taxes?</p>
<p>Long answer: You do have to pay the taxes but any part of the AGI that is from taxable scholarships/grants and/or WS will have no effect on the EFC. You do have to report the AGI on FAFSA, but there is another question that asks what scholarships/grants/WS are included in the AGI. The number reported in that question is deducted from the AGI before the EFC is calculated.</p>
<p>So if your daughter’s AGI is $17,000 and that consists of $5000 non WS income, $1000 WS income, and $11000 taxable scholarships you:
- Report the $17000 AGI on FAFSA
- Report that $12000 of that is WS and taxable scholarships
- The EFC formula will deduct the $12,000 from the $17,000 leaving $5,000 income. (This will be further reduced by any taxes reported from the tax return and allowances for FICA and state taxes).</p>
<p>Short answer: Only the non WS/scholarship/grant income will impact the EFC.</p>
<p>Thank you, this makes a little more sense to me now! I was fearful that FAFSA would include the scholarship money as income thus increasing the EFC.</p>
<p>Thanks again!</p>