<p>Apologies in advance if the answer to my query is well-known; I am fortunate enough that I have not had to investigate FA. However, my sister has not been so lucky - she is divorced with one son (HS soph, good student), has erratic income as an artist, gets minimal support from ex, has used all her savings and is deep in credit card debt. She is custodian of $35K contributed by our parents and held in trust for her son, and has not touched it as it is set aside for college. Naively, I would imagine she should start using that account for expenses related to son's care, as he would be expected to contribute it all for tuition, so she might as well spend it down, and hope for sufficient FA come college. Its not like this is gaming the system - she has no money now, and he has to eat. Do I have this right?</p>
<p>Two options:</p>
<h1>1 – She spends down the custodial money as quickly as possible when her son gets to college and picks up the anticipated additional FA in the following years. She can spend the money prior to college, but to keep the IRS happy, keep the expenses to non-typical expenses to raising of the son. Some may argue the point, but I’d hate to be in an audit and try to justify using the custodial money to buy groceries and underwear.</h1>
<h1>2 – She moves the custodial money into a custodial 529, thus moving the 35k out of her son’s asset category into her asset category. 20% of all compared to 5.6% after asset protection allowance.</h1>
<p>Either of those is much better than leaving it in the son’s name.</p>
<p>Your argument assumes her son will qualify for schools that meet full need through aid-- very few schools do this. If he is not a VERY good student who will get into one of these generally top schools that meet need he $35K could make the difference between him affording some desirable colleges or may save him from huge loans.</p>
<p>There is a misconception by many on this board that there are only a few schools in this country that will meet full need to only the most select students. That is frankly wrong. There are hundreds of colleges all across the country that will roll out the red carpet to many, many under-privileged students.</p>
<p>^ It’s true. My school meets 100% of need for people living at about 150% of the poverty line, unfortunately it is only for instate students I BELIEVE. It is not even our state flagship school.</p>
<p>Scottaa, you say this a lot. If this is so many of us would love that list because at least in my case, this is not at all what I’m seeing. I just finished a financial aid course taught by an industry expert who could not identify the hundreds of colleges you refer to.</p>
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<p>BAD idea. The problem is that there is no guarantee that your nephew will get into a college that will meet 100% of need. The fact that there is an ex in the picture who provides minimal support means it is likely that there will be a significant gap. Why? Because most of the private schools that are generous with grant money ALSO insist on getting financial information from the noncustodial parent as well. If your sister’s ex is uncooperative… that could lead the nephew to be denied financial aid entirely, because the required documentation has not been submitted. If the ex does cooperate and has a significant income… that will get added to the EFC … but that doesn’t mean the ex will contribute a dime. The colleges want the data but they have absolutely no sympathy for the typical situation where the ex refused to contribute a dime. (And the fact that the ex provides “minimal support” is evidence that he is still in the picture…so the colleges WILL want that info).</p>
<p>There are many colleges that require only the FAFSA, which does not take the income of the ex-husband into account… but those colleges usually do not promise to meet full need. (To put it another way, generally the “full need” colleges reserve the right to determine “need” on their own terms, and they want to know as much as possible about assets & income available to both parents in making that determination). </p>
<p>Scottaa’s 2 suggestions are the best options – either spend down most of the trust fund in year #1, or else move it to a 529. (I’d go with option #2, because there really is no guarantee that the college is going to make up the difference in year #2). </p>
<p>However, Scottaa’s post about all those colleges that “meet full need” is… again … relying on hope & prayers, not reality. If there is $35K in the bank, the parent has a responsibility to do her best to conserve that. She should have a heart to heart with her son about the finances – $35K could go a long way for a kid who opts to live at home & attend community college – or the son may be able to attend an in-state college or a college that offers merit aid and appreciate having that money available. </p>
<p>Keep in mind that “meets full need” does not mean that need is met with grants & scholarships. A kid with a $35K trust fund will probably not qualify for a Pell grant, so at many colleges could be looking at hefty loans. Again… it would be a shame if the money were spent on non-essential items under the misguided belief that the son will get generous aid.</p>
<p>You know…if this kid is planning to go to college, this trust will be a huge help in financing his education especially IF he attends an instate public university. </p>
<p>I don’t know why folks feel that they should somehow get rid of money set aside for college. Your sister should feel lucky that she has this for her son. To be honest, from your description, it does NOT sound like she is a very good money manager. I would NOT advise that SHE be allowed to spend this money. If she is so concerned about current living expenses (OK…I’m ready to get slammed) perhaps she should consider getting a job that pays a weekly check and supplementing it with her artist’s income…rather than tapping into an account that I believe should be left for college costs. Simply put…if she pi*<em>e</em> that college fund away…there is NOT GUARANTEE that colleges will fill in the financial blanks for her child.</p>
<p>Sister does feel lucky she has this fund, which is why it has not been touched while she has gone into $15K in credit card debt. And yes she should get a job, but that does not seem to be in the picture (she is an artiste, and maintains a fantasy of supporting herself with her craft). Ex is an underemployed musician, a giant slime-trailing slug, but probably will be responsible enough to document his lack of income come FA application time.</p>
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noob question - what does this mean?</p>
<p>Strike the noob question - I found the answer.</p>
<p>Doesn’t it also depend on how the trust is set up? My brother died in a car accident a couple of years ago, and when my parents were setting up their trust for estate planning, they made provisions for his children (as my brother’s heirs). My other brother is the trustee of that trust since my parents have both passed away. There are a lot of restrictions on disbursement, etc., as related to ages of the kids, etc. And I was asking him if the trust can be counted against them in terms of financial aid, and he says, “no.” BTW, he’s an attorney and his collegue handled setting up the trust. It’s set up not as a pay as you go in terms of college education, but as a pay back after graduation, as incentive to complete a degree. My dad’s wishes …</p>
<p>So, wouldn’t it be advisable to speak with an attorney to make sure the trust will be counted against the kid?</p>
<p>zebes</p>
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<p>This sister has this much credit card debt. I do not think anyone should be advising her to spend down this kid’s money for college…for any reason. She clearly is NOT a good money manager and this will simply give her more money to mismanage. Sorry…don’t support this notion if this kid really is planning to attend college. This trust will help him attend college…and that is what the OP said it was set up for. Leave it alone and consider this boy lucky.</p>
<p>drb, good for you for looking into this for your sister and nephew, and good for your sister for having left this money where it is, though she is under great financial pressure!</p>
<p>I would be loathe to suggest spending the money down, as once it’s gone, it’s gone. Sounds to me like moving the money into a 529 is an idea that bears serious investigation. How the 529 is titled – owned – may depend on how the trust is set up.</p>
<p>Good luck! (Good timing, too, to look into this while your nephew is a sophomore!)</p>
<p>I would hazard to guess that there is no one else on this board who has seen 10% of the varied awards I have seen in my career.</p>
<p>hmom - whoever the expert is, is not much of an expert in my opinion if their message is full-need met is some rare holy grail.</p>
<p>Stop with the fear mongering. </p>
<p>Just off the top of my head - schools I remember full need packages from…</p>
<p>Coe, Lake Forest, Iowa State, Luther, Tulane, Butler, St. Ambrose (although not common), Truman State, Emory, Central, North Central, University of Dubuque, Washington, LeTorneau, Wisconsin-Platteville, Chapman, Knox, Beloit, Illinois College</p>
<p>And that is just a small handful. Maybe some would expect that from Emory or Tulane or Washington, but availability goes well beyond those schools.</p>
<p>I am so sick of this lie that will not die. Getting the money that a student needs to go to college is not winning the lottery, and it is not only available at a few elite institutions for only the most select students. It is available!!!</p>
<p>I would hazard to guess that the collective information here beats the varied awards you personally have seen. </p>
<p>I just looked at Iowa State; I couldn’t find anything on their website that says they guaranteed to meet full need. I did run their calculator for a hypothetical freshman who is OOS with an EFC of $4042 - 5000, and got:</p>
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<p>scottaa, do you really think that will work for the OP’s nephew??</p>
<p>I don’t.</p>
<p>zeba - my understanding is that trusts **do **count against students for financial aid. from [Completing</a> the FAFSA 08-09/The Application Questions(40)](<a href=“http://studentaid.ed.gov/students/publications/completing_fafsa/2009_2010/ques3-2.html]Completing”>http://studentaid.ed.gov/students/publications/completing_fafsa/2009_2010/ques3-2.html)
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<p>Owl-</p>
<p>I’d say you are flat out wrong. Most everyone else on this board is looking at the college financial spectrum through a narrow slit of their individual experience. There is one FAO on here whose opinion I value highly, but their experience is still limited primarily to their school. I on the other hand, have been dealing with hundreds if not thousands of students and the schools they applied to for years.</p>
<p>What is important? An illusory promise, or the money?</p>
<p>There are few colleges that promise they will meet 100% of the need. But there are hundreds that do so on a regular basis.</p>
<p>Frankly, I don’t care what a school promises. All I care about is how much money the student ends up with.</p>
<p>Take for example Iowa State. Iowa State does not promise to meet 100% of the student’s need, and their track record only indicates 80% on average. But that is only an average. That means there are students who received more and some who received less. A student should not rely upon Iowa State alone in anticipation of full need met. However, it can be one of a well thought out selection of schools that will increase the student’s opportunities for full need met at one or multiple schools to which they apply. That was the case of Iowa State in my example. </p>
<p>Students and families have to get away from this idea of picking only one or two “right” schools and start thinking strategy. Well thought out strategies get students the money they need, not some illusory promise.</p>
<p>Question re: putting the trust $ in a 529 to assess it at a parent rate vs student rate… Since the 529 would not be child owned or parent owned, it would be trust owned (with the child as beneficiary) my understanding is that it won’t be “assessed” at the parent rate, it’s still an asset of the trust and the value of the 529 must be reported as a student asset since the student is the beneficiary. Is this incorrect?</p>
<p>But the bottom line is that there are few schools that guarantee meeting need and few students that can count on having full need met. Sure, most colleges meet need for some kids–generally kids who are way overqualified against the rest of their pool.</p>
<p>But if we’re talking about a kid who wants to go to the best school he can get into–and most do–very few will have 100% of their need met.</p>
<p>Guaranteed need met aside, the best outcome would be if your sister meets the qualifications for Automatic 0 or Simplified Needs which would remove the trust from the FAFSA EFC equation. This sounds like a family that should start considering college options now, and do some research into how FA works. </p>
<p>I agree with scott, that many low EFC kids do get 100% need met (with student, not parent, loans) at institutions not generally known for it. Particularly at FAFSA-only schools, instate publics, and if they also have good grades/scores. But nothing can be assumed going in, and it does take a well-researched college list or alot of luck! </p>
<p>I would advise your sister to stop using her credit card and pay it down as much as possible, investigate the possibility of having the custodial account in her name (if it’s not already) and making sure she understands the requirements for Auto 0/Simplified Needs by his junior year. Remind her that FAFSA is based on the prior year’s tax information, so this may be the best time to tackle these things! If her income is really low, there are other things like free/reduced school lunches that she should investigate and may be beneficial when it comes to filling out FAFSA.</p>