Grandma is moving in with her Social Security check. Does this help
or hurt my FAFSA results? Does her Social Security check count towards
my parents' income on the FAFSA?
— Doreen Y.
The answer is complicated and depends on whether Grandma receives the
Social Security benefits in her own name or whether they are received
by your parents on her behalf. The answer also depends on whether
Grandma may be counted in the household size.
Grandma may be included in household size on the FAFSA only if your
parents provide more than half her support and will continue providing
more than half her support during the award year. Support can include
money, gifts, loans, food, clothing, housing (fair market rental value
of the accommodations they are providing her), and medical and dental
If Grandma's Social Security benefits are paid to her, they count as
part of her own support and are not reported on the FAFSA.
If Grandma's Social Security benefits are paid to your parents, they
count as part of the support your parents provide to Grandma. If she
is included in household size and the benefits are paid to your
parents, the taxable portion of the benefits are included in your
parents' adjusted gross income. (The tax-free portion of Social
Security benefits are no longer reported as untaxed income on the FAFSA.)
If Grandma's Social Security benefits are paid to your parents, it
will reduce your eligibility for need-based financial aid. If Grandma
is counted in household size on the FAFSA, it will increase your
eligibility for need-based financial aid.
Note that any support that Grandma provides to you, the student, is
counted as untaxed income to you on the FAFSA and will reduce your
eligibility for need-based financial aid. Any support that Grandma
provides to your parents, however, is ignored on the FAFSA.
Do my parents include what they have for retirement in their
savings amount on the FAFSA?
— Stacey G.
Money in a qualified retirement plan account, such as a 401(k),
403(b), Keogh, SEP, SIMPLE, IRA, Roth IRA or pension plan, is not
reported as an asset
on the FAFSA, although the employee's voluntary
current year contributions to these plans will be reported as untaxed
Money saved in taxable accounts, such as a savings account or
brokerage account, is reported as an asset on the FAFSA. Likewise,
money stuffed under your mattress is reported as an asset on the FAFSA. You
may intend to use the money for retirement, but if the money isn't in
a qualified retirement plan account, it can be used for any purpose
and is not restricted to retirement. This is true even if you are
The federal need analysis formula includes an asset protection
to protect a portion of money saved in taxable
accounts. The allowance is based on the age of the older parent and is
roughly the present cost of an annuity which, when combined with
Social Security benefits, would yield a moderate standard of living at
retirement. For most families the asset protection allowance is about
$50,000. For parents who are closer to retirement it can be as much
as $30,000 higher. So the need analysis formula does shelter a small
amount of money saved for retirement in taxable accounts, but you
still have to report this money on the FAFSA.