It’s that time of year – time to fill out the Free Application for Federal Student Aid used by more than 99% of public universities.
Many parents take the “why bother” approach. “We have too much money. We’ll never get any aid.”
The first thought is usually “why did I have kids” while the second, slightly more logical thought is “maybe I should hide money.”
Here’s the bad news…
Hiding assets is a myth. Conscientious savers are generally not punished through diminished chances for financial aid.
Factors that impact financial aid include:
- parental income
- number of children in college simultaneously
- parents’ marital status
Assets on the other hand are a limited factor. For example aid formulas don’t consider:
- Roth IRAs
- SIMPLE IRAs
- home equity
- life insurance cash value
So what assets are considered in the financial aid calculus?
- checking/savings accounts
- taxable brokerage accounts
- Coverdell IRAs
- equity in investment properties
Assets included/excluded in the financial aid stew work towards deriving the Expected Family Contribution. Here’s the 2018-2019 formula.
Note that FAFSA assesses parental assets up to 5.64% so for every $10,000 of parental assets the eligibility for financial aid drops by $564.