I am an incoming freshman in college and my single mom is worried
about the Free Application for Federal Student Aid (FAFSA). We
recently sold our house and are currently living in a rented
apartment. The money from selling the house is in her savings
account. We are currently looking for a new house. My mom is worried
that if we haven't bought a house by January-March, the money she has
to buy the house would be included on our FAFSA, which would reduce
— Kimberly P.
$1,000 April Scholarship
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Money in a bank account is counted on the FAFSA, while the net equity
of your principal place of residence is not. Assets are reported
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as of the date the FAFSA is filed. So your mother is correct -- if you
haven't bought a new home by the time you file the FAFSA, the money in
the bank account will count against your aid eligibility.
However, it is still possible that the money in the bank account could
be disregarded. If your mother's adjusted gross income is less than
$50,000 and she satisfies certain other criteria, such as being able
to file an IRS Form 1040A or 1040EZ or qualifying for various federal
means-tested federal benefit programs, the "simplified needs test" will
cause assets to be ignored on the FAFSA.
Even if she doesn't qualify for the simplified needs test, there is an
asset protection allowance based on the age of the older parent that
shelters a portion of parent assets. For most parents of college-age
children (median age 48), the asset protection allowance is about
$50,000. Above this threshold assets are assessed according to a
bracketed scale with a top rate of 5.64%.
In practice, most families who qualify for the Pell Grant will not
lose eligibility just because they sold a home and have not yet
purchased a new home.
There is legislation currently pending in the US Senate that will
eliminate the six asset questions from the FAFSA starting in the
2011-12 academic year. However, this legislation includes an asset cap
that eliminates eligibility for the Pell Grant and other need-based
aid for families with assets greater than $150,000 (US House of
Representatives version of the legislation) or $250,000 (US Senate
version of the legislation).
I have a 17 year old granddaughter who lives with my husband and
me. She has no contact with her mother and her father signed away
parental rights at age 5. The judge has given us custody. Is she
considered independent on the FAFSA? We are retired and have limited
income. Should we as her custodians assume the parental place on the
— Marsha R.
The College Cost Reduction and Access Act of 2007 (P.L. 110-84) and
the Higher Education Opportunity Act of 2008 (P.L. 110-315) changed
the definition of an independent student to include students who are
or were in a court-ordered legal guardianship immediately prior to
reaching the age of majority. She will be considered independent and
the parent questions on the FAFSA will be left blank. However, any
cash support you provide her (including housing, food, clothing,
medical and dental care, college costs and any other money you paid on
her behalf) will be reported as untaxed income on her FAFSA.