<p>Those FAFSA only schools don’t meet full need but instate publics will be affordable AND leave a nest egg for this student.</p>
<p>He will not qualify for need based aid at a school that meets full need due to his and his family’s assets.</p>
<p>If they want to preserve a portion of this money, the easiest and best way is to attend the flagship instate college. OR apply to schools and hope for substantial merit aid. I somehow think need based aid is off the table for this student at any school that requires the Profile or a college finaid form.</p>
<p>I think there are two choices here. If the parent wants to preserve the maximum amount of money then the student should be looking at in-state public colleges and private colleges where the student would qualify for merit money. If the parent does not want to spend the money on college then they should stay away from colleges that cost a ton of money. I guess sometimes you just can’t have it both ways. With that regard I agree with Thumper. The house is paid off so the surviving parent is in pretty good shape for retirement if working. The student has a well funded account that should/could pay for college and have money leftover. If the social security payments stop then the student could also work 10-15 hours a week for pocket spending money and preserve some more of that inheritance. His dad left you both with a wonderful gift.</p>
<p>I don’t see how the family can preserve some of the inheritance unless the kid goes to a state public or gets a big scholarship.</p>
<p>How much does the mom plan on paying towards his college? It sounds like her EFC is about $17k for a FAFSA EFC and high for a CSS EFC.</p>
<p>If she sends him to a state school and pays about $10k per year herself (a reduced EFC) and the son pays the rest, he’ll still have plenty of money left. The same would happen if he got a big scholarship.</p>
<p>My kids and I would prefer to keep their savings for later too, but the later is the college education. I am truly sorry about how your son got the money, and certainly understand that this is to take care of him now that his father no longer can. Your son is fortunate that you and his father planned well enough that he has college funds that can give him some security in those years while he matures and gets his education. </p>
<p>As the others have said, look into ways that might shelter some of the money. Perhaps if he pays some of the home expenses for you and spends down a portion of the funds, it would then be assessed at the 5.5% that parents are expected to give of their assets instead of the 20% hit he would get if it is sitting in his name. My rising senior is depleting his accounts this year since he gets no allowance for assets and the hit is harder for him. We just might get a bit of aid if both boys do that, with two in college. They are taking on some of their own expenses for that reason.</p>
<p>I feel like maybe vballmom’s info might have gotten lost in the shuffle.</p>
<p>If the money could be moved into a 529, it would change how it’s treated as an asset according to the federal (FAFSA-based) methodology. It would be assessed at the parent level of about 5.5% instead of the student level of 20%. The PROFILE would still treat it as a student asset.</p>
<p>Although there are not many private colleges that are FAFSA-only and also meet a high percentage of need, there are some: Chapman, Denison, Willamette, and Allegheny are a few examples.</p>
<p>^^^What vballmom said. Student-owned 529’s are still treated as parent assets, which means only 5.6% is considered every year instead of 20%. If there is money left, he can withdraw it but will have to pay a penalty. It might be worth the 10% penalty if it results in more financial aid.</p>
<p>The formula grabs 20% of student assets every year, which would leave around 40% of the money at the end of 4 years if you didn’t have to tap more than the 20% every year.</p>
<p>Also - do you have control over when the assets are moved from the father’s estate? I’m not sure how assets you are due to inherit but haven’t been received yet are counted; if advantageous, maybe you can (legally) delay transferring the assets and keep them out of his name. </p>
<p>Some schools that count house equity don’t count all of it, it varies by school.</p>
<p>Thanks Calreader and notrichenough, I was thinking the same thing since my post was on Page 1.</p>
<p>Note that I suggested that she transfer some of the UTMA to a custodial 529; I don’t think it’s wise to transfer all of it. The reason is that if the son does go to a school where the COA is $25K/year or so, such as a public or a school where he gets good merit aid, it’s possible that it won’t cost the entire $150K that’s available. There’s little point in overfunding a 529 because of the penalties and tax on the gain that is involved if the money is withdrawn for non-qualified expenses. Plus it would be good to have some discretionary money available from the UTMA during the son’s college years. </p>
<p>You could do the math as notrichenough suggests to see if it’s worth moving 100% to the 529, estimating ahead of time how much, if any, penalty would need to be paid as a trade-off for potentially more aid.</p>
He’ll pay a 10% penalty on the total amount he takes out at the end, but will pay a 14% penalty <em>per year</em> (difference between parent rate and student rate) to not have it in the 529. </p>
<p>I think this will be much cheaper overall, unless he doesn’t get any FA.</p>
<p>I am so sorry for your loss. Your son is loved in the best way possible – with the foresight and means to give him an education. </p>
<p>While you want the best possible outcomes for your son, please consider the situations of so many college students who are having to earn or borrow every nickel for college. No college, even the best funded, have enough for all the kids. Your son CAN attend a college AND have money left over if he attends an instate public school. And you won’t even have the misery of filling out the FAFSA. </p>
<p>If he wants a private or out of state school, he will have that choice too. He will be required to spend down his assets. Perhaps in the third or fourth year he will qualify for aid. Going that route may mean he has little money at the end or perhaps has debts (like most students do). </p>
<p>So, there are choices. But it, quite frankly, makes me grumpy to think of a young man (and his mother) who has strong resources trying to game the system so he has bucks at the end when doing so means that other students will do without. Do not kid yourself. You have the money to get a paid for education for him – and you are asking for more.</p>
<p>He could start at community college the first two years, that would save a LOT of money compared to most other options. Then even if he went to a $40,000 a year college for the last two years, he would still have some left over. But personally, I would say choose an in-state public school and save even more money.</p>
<p>At any rate, it sounds like he will be able to complete college without any debt, which is wonderful and a much better option than most college students have!</p>
<p>A lot of misinformation out there on 529s - no, he WON’T “pay a 10% penalty on the total amount he takes out at the end” (ie., not for qualified educational expenses). </p>
<p>**You only pay a penalty (and taxes) on the EARNINGS portion of the amount you take out as a non-qualified distribution. SInce he’s already 16, the money won’t be in the 529 very long and is not likely to earn very much percentage-wise. (and since he’s 16, you’d want to use a lower-risk (and therefore low-yield) investment option for the 529 funds)
Also, I think there’s a loophole type of thing where, if the child received any sort of scholarship (and I think this may include need-based grant aid), there is no longer any penalty on non-qualified withdrawals up to the amount of the scholarship. The amount (the EARNINGS portion only) is still taxable (at the child’s rate, I think, since it counts as income to the child when it is a
non-qualified distribution), but there is no 10% penalty.</p>