I am trying to advise two students whose mother died four years ago and their father died last week, unfortunately. The girls' grandmother is now taking care of them (a 9th and 10th grader) and we are concerned about the possible college financial ramifications. They are in the process of determining the Social Security benefits from their father's contributions. Once that amount is established (dependson claims), it may be advantageous financially for the grandmom to adopt them. However, will it be an advantage on college financial award/need-based aid to be an orphan or the adopted "child" of a "mother" who will be 70+ at the time they apply for college. — D.P.An orphan is a child both of whose parents are dead. But is a child who is adopted after the death of both biological parents still considered an orphan? How does a student's status as an orphan affect eligibility for need-based financial aid? The Higher Education Act of 1965 specifies that a student who was anorphan at any time since reaching age 13 or older is considered an independent student even if the student is subsequently adopted. This definition was enacted by the College Cost Reduction and Access Act of 2007 (P.L. 110-84), effective July 1, 2009. The current statutory language appears in 20 USC 1087vv(d)(1)(B):
The term "independent", when used with respect to a student, means any individual who —The previous language appeared in 20 USC 1087vv(d)(2) and read "is an orphan or ward of the court or was a ward of the court until the individual reached the age of 18." The dependency status of each girl is determined separately from the other. (A student can also qualify as an independent student if the student is in a court-ordered legal guardianship, or was in a court-ordered legal guardianship prior to reaching the age of majority. The legal guardianship must have been determined by a court of competent jurisdiction in the student's state of legal residence.) So if the orphaned girls are age 13 or older at the time of their adoption, their adoption by the grandmother will not affect their status as independent students. (Placing the girls into a court-ordered legal guardianship before they reach the age of majority will also cause them to be considered independent students.) An independent student does not report the income and assets of the student's biological or adoptive parents on the Free Application for Federal Student Aid (FAFSA). But if a student is an independent student, any financial support provided by the grandparents to the student will be counted as untaxed income to the student on her financial aid application forms. If the girls are adopted before reaching age 13, they will be considered dependent students and the income and assets of the adoptive parents must be reported on the FAFSA. But then the support the student receives from her adoptive parents is not reported as untaxed income to the student. Whether independent student status yields more or less financial aid will depend on the tradeoff between counting the income of the adoptive grandparent versus counting the financial support from the grandparent. Generally, if the grandparent's sole source of financial support is Social Security retirement benefits, the student might qualify for more financial aid as a dependent student, since most of the grandparent's income will be sheltered by the income protection allowance and various tax allowances. Otherwise the students will likely qualify for more financial aid as independent students. There are other aspects of the financial aid formulas that may affect the amount of financial aid the student receives. Life insurance proceeds are reported as an asset on the FAFSA and may affect eligibility for need-based aid. However, if an independent student's income was less than $50,000 and the student filed or was eligible to file an IRS Form 1040A or 1040EZ, the student will qualify for the simplified needs test, which causes assets to be disregarded. The student can also qualify for the simplified needs test by having anyone in the student's household receive certain means-tested federal benefits, such as SSI, SNAP, free and reduced price school lunch, TANF or WIC, instead of the income tax return requirement. (For a dependent student, the income and tax return criteria apply to the student's parents and the parent's household.) In addition to the simplified needs test, there is automatic zero EFC, which substitutes a lower income threshold ($24,000 in 2018 - 19). If a student qualifies for automatic zero EFC, the student's EFC is set to zero and the student will receive a full Pell Grant. But automatic zero EFC is available only for dependent students and for independent students who have a dependent other than a spouse. An independent student who does not have a dependent other than a spouse is not eligible. There are a variety of scholarships for orphans, which can be found by searching the Fastweb scholarship database. Some of these scholarships treat an adopted child differently than an unadopted orphan. But usually the distinction is drawn between children who are in foster care versus children who are not in foster care.
is an orphan, in foster care, or a ward of the court, or was an orphan, in foster care, or a ward of the court at any time when the individual was 13 years of age or older;