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How Does a Parent Enrolling in College Affect the Child's Financial Aid?

The Fastweb Team

August 29, 2017

How Does a Parent Enrolling in College Affect the Child's Financial Aid?
My daughter is hoping to attend a private college next year. Of course, we will be applying for financial aid and as many scholarships as we can find! My husband works full time and I have always worked full time. In late February, I was temporarily laid off from my job. I should be returning to work on a part-time basis in June. I am contemplating going back to school, but would have to apply for

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financial aid for myself as well. Would applying for financial aid for myself now hurt the amount my daughter would get when she applies next year? I don't want to hurt her chances of getting aid by going to school myself. — Laura K.

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When a parent applies for financial aid for her own education, it generally does not hurt her child's financial aid eligibility and may even help both parent and child to qualify for more student financial aid. The financial aid the parent receives is not counted as part of total

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income on the child's current or subsequent FAFSA. The FAFSA includes several questions designed to identify financial aid that may have been included in taxable income so it can be excluded from adjusted gross income in the calculation of total income. The main question is whether the child can be included in the number in college figure on the parent's FAFSA and whether the parent can be included in the number in college figure on the child's FAFSA. Increasing the number in college can significantly increase eligibility for federal student aid. If the child is a dependent student she will be counted in the family size on the parent's FAFSA. Since she is included in family size on the parent's FAFSA, she can also be included in the number in college on the parent's FAFSA if she is or will be enrolled in an eligible college on at least a half-time basis in a degree or certificate program during the award year. Whether the parent can be included in the number in college on the child's FAFSA is more complicated. The Higher Education Amendments of 1998 (P.L. 105-244) modified section 475(b)(3) of the Higher Education Act of 1965 [20 USC 1087oo(b)(3)] to exclude the student's parents from the number in college, effective starting with the 2000-01 award year. Before this change parents could be counted in the number in college on a child's FAFSA. This change was enacted because the previous rules were prone to fraud, where parents would enroll in a local college just to increase their child's eligibility for federal student aid, usually without attending classes or intending to obtain a degree. To address this problem, Congress switched the number of parents enrolled in college to a professional judgment item, by amending section 479A(a) of the Higher Education Act of 1965 [20 USC 1087tt(a)] to include "the number of parents enrolled at least half-time in a degree, certificate, or other program leading to a recognized educational credential at an institution with a program participation agreement under section 1094 of this title" in a list of examples of special circumstances eligible for an adjustment. This made the inclusion of parents in the number in college on a child's FAFSA subject to the discretion of the college financial aid administrator. College financial aid administrators are in a better position to judge whether the parent's enrollment in college is genuine or not. If a parent is enrolled in college at the same time as her child, she should ask the college's financial aid administrator for a professional judgment review to count the parent in the number in college figure on the child's FAFSA. (If the parent is quitting her job to go back to school full time, she should also ask for an adjustment to income corresponding to the anticipated reduction in family income.) Most college financial aid administrators will want to see clear proof of enrollment on at least a half-time basis, including paid bursar bills and in some cases grade reports, before making an adjustment to the child's FAFSA. They usually verify this information with the other college. If there are any signs that the parent isn't genuinely seeking a degree they will disallow the adjustment. If the college financial aid administrator allows an adjustment, most will increase the number in college while some will decrease the parent income by the amount of the parent's college costs. Either of these changes will improve the child's eligibility for need-based financial aid. My 19-year-old is graduating with his Bachelor's degree in one week. One of his professors has asked him to pursue a Master's degree and I am beginning my law school career at the same time. My son has done projects for which he has been paid nominal amounts but has never had a regular (even part-time) job. On the FAFSA we listed him as independent (according to the FAFSA guidance for grad school) but also indicated that there are two of us in the household who will be full time students for the upcoming year. I found no FAFSA guidance on this situation and I do continue to provide more than half his support. FAFSA has returned my application for corrections on this question but I have answered appropriately according to the given definition and instruction. What is correct? Can you point me to the standard upon which FAFSA is basing its decision? — Kim S. If the FAFSA is for a school year during which your son will be pursuing a Master's degree, he will be a graduate student and is considered independent for that year.
Unless you are considered part of his household (i.e., you live with him and he provides more than half your support and will continue providing more than half your support through the end of the award year), you cannot be counted as part of his family size and thus cannot be counted in the number in college on his FAFSA. You will need to correct his FAFSA. However, he is considered a member of your household on your own FAFSA if you provide more than half his support and will continue to do so throughout the award year. If he's considered a member of your household, you can count him in the family size and the number in college figures on your FAFSA. Similar rules apply to counting him in family size and number in college on the FAFSAs of his siblings. Note that student aid, including student loans, counts as part of the student's own support. So even though he does not work, it is possible that the student aid he receives exceeds the support you are providing him. If he is using savings to pay for graduate school or living costs, that also counts as part of his own support. You will have to do the math to determine whether you are really providing him with more than half his support, now and through the end of the award year. The college may have a support test form that they use to evaluate whether a parent is providing more than half support. Dependency status for federal student aid purposes uses a different definition of support than dependency status for IRS purposes. Most college financial aid administrators will question the inclusion of an independent student in the household size on a parent's FAFSA. However, it is possible for a student to be independent on his own FAFSA and to be included as a dependent on the parent's FAFSA or the FAFSA of the student's sibling, if the parent provides and will continue to provide more than half support. The rules are not symmetric. The student is not required to live with the parent in order to be counted in family size and number in college on the parent's FAFSA. Only the support test is used. (Different rules apply when the student is being counted in family size and number in college on the FAFSA of someone other than the student, the student's spouse or the student's parents. In such a circumstance the student must live with the applicant in addition to receiving more than half support from the applicant.) The 2011-12 Federal Student Aid Handbook states on page AVG-30 that "For children in the household size, the 'support test' is used rather than residency because there may be situations in which a parent supports a child who does not live with her, such as when the parent is divorced or separated." The Federal Student Aid Handbook also states on page AVG-33 that household size for an independent student includes "The student’s children, regardless of where they live, if they will receive more than half of their support from the student from July 1, 2011, through June 30, 2012." Similarly, the verification worksheet for independent students specifies in the family information section that the student should include "your children, if you will provide more than half of their support from July 1, 2011 through June 30, 2012, even if they do not live with you." The Federal Student Aid Handbook also provides two examples to illustrate. The first example appears in the margin on page AVG-31:
Dependent student household size example Lydia is a dependent student, and her parents are married. Her brother Ron is 26, but his parents still provide more than 50% of his support, so he is included in the household size. Her sister Elizabeth is attending college but is an independent student and isn’t supported by their parents, so she isn’t included in the household size. Her sister Susan is not attending college, but is working and supporting herself. However, if Susan were to apply for student aid, she would be considered a dependent student, so she is included. Therefore, the household size that Lydia reports for her parents is 5.
The second example appears in the margin on page AVG-33:
Independent student household size example Eddy is an independent student. He was married, but now he and his wife have separated. He’s paying child support, but it isn’t enough to provide more than half his children’s support, so he can’t include his children in his household size. Eddy’s nephew Chavo lives with him and gets more than half of his support from Eddy (and will do so for the award year), so he can be counted in Eddy’s household size, which is 2. Having just turned 24, Chavo is also independent, and his household size is 1.
These examples are based on the statutory language in section 481(k) of the Higher Education Act of 1965 [20 USC 1087vv(k)], which was added by the Higher Education Technical Amendments of 1993 (P.L. 103-208) effective starting with the 1993-94 award year. The treatment on the CSS/Financial Aid PROFILE form, which is used by about 250 colleges for awarding the college's own financial aid funds, may differ.

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