I am a single parent with a child who will be attending college next fall. I only make $21,000 a year but I have $65,000 in mutual funds that I have invested. The money came from my father's estate. Will my investments affect my son receiving grants for college?
"The short answer is yes," said FPA member Kimberly E. Wirtz, CFP®, of John E. Sestina & Co. "Colleges will look at your income and your assets to determine your need." The Free Application for Federal Student Aid (FAFSA) considers a parent's taxable assets as "usable" to pay for college. However, retirement assets are usually not considered as usable. So, for instance, "if you have an inherited IRA that will likely not be considered," she said.
If your money is in a taxable account, you should also take note of the following little-known fact about financial aid: Withdrawing the money out of your account or spending it down is not an option. "The 'base year' is January of the junior year, and that is the date they will go back to look at your assets," said Wirtz. "Since your son is currently a senior, entering college in the fall, his base year began in January. Thus, it is too late to move any of this money as financial aid departments will still count it."
Wirtz also suggested that you complete the FAFSA online. "It is harder to make a mistake online and encourages you to be more thorough," she said. "Also be sure to do it as close to January as possible, as funds are doled out on a first-come, first-served basis."
In addition, "it would be helpful to have your tax return prepared at the time you complete the FAFSA," Wirtz said. "Finally, if you are not eligible for need-based aid, please remember to also search for available grants and loans and merit-based scholarships."