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MAY 2018
Five Facts About Assets, Savings and Financial Aid
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When it comes to financial aid eligibility, your assets and savings may have little or no impact. Here's why:
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1. A family's primary residence and retirement accounts are excluded from consideration.
The following assets are completely excluded when determining federal financial aid eligibility: the family's primary residence, retirement accounts and family-owned and controlled small businesses.
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2.
For most families earning under $50,000, all assets are excluded
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When determining federal financial aid eligibility for dependent students, the calculation excludes both parent and student assets when the parents' combined AGI (or income earned from work for non-filers) is less than $50,000 and:
- Any household member received a federally means tested benefit during 2016 or 2017 (SSI, SNAP, Free or Reduced Lunch, TANF or WIC); or
- Parents are not required to file an IRS Form 1040; or
- Either parent is a Dislocated Worker
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3.
T
here is an Education Savings and Asset Protection Allowance that may shelter assets
.
Even when savings are included, the federal financial aid formula has a built-in Education Savings and Asset Protection Allowance. This allowance shelters a portion of assets for those over the age of 25. For example, for a married couple where the older parent is 46 years old, the Education Savings and Asset Protection Allowance is $20,300. As a result, only assets that exceed that amount of the asset protection allowance will impact federal financial aid eligibility.
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4.
No more than 5.64% of remaining assets are considered available
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Of the assets that remain after the Asset Protection Allowance, no more than 5.64% of parent assets are considered available and impact federal aid eligibility. Often the percentage of assets that are considered available for education is even less than 5.64%.
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5.
Section 529 accounts owned by either the parent or a dependent student for the benefit of the student are considered a parent asset.
When parent information is required to determine eligibility for federal financial aid, 529 assets are treated as a parent asset if the student is dependent, and the account is owned by a parent or the student. This treatment can be beneficial because no more than 5.64% of parent assets impact federal aid eligibility, where the rate for dependent student assets may be as high as 20%.
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NOTE:
Information on federal financial aid is based on current interpretation of federal financial aid rules, which are subject to change. The rules in effect at a later date may be different. Distributions from section 529 accounts owned by a party other than the parents or student may be treated differently. For more complete information, please go to the U.S. Department of Education's website at
www.ed.gov
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Join us for this month's
FREE
Wednesday Webinar:
Saving for College
Wednesday, May 9 • 10:00–11:00 a.m.
Saving for college is a good thing! Join us for this month's Wednesday Webinar where we'll discuss the benefits of saving for college. In this presentation, we'll debunk common myths that may prevent families from saving and demonstrate why saving even small amounts can have a big impact. Additionally, we'll share information on grants that are available to help Maine residents start and continue saving for college.
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FAME's College Access and Financial Education Team:
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The Finance Authority of Maine (FAME) does not discriminate in the administration of any of its programs or in its employment practices on the basis of race, color, national origin, age, gender, religion, physical or mental disability, political affiliation, marital status or sexual orientation. FAME is an equal opportunity employer, provider and lender.
FAME provides links to other websites as a convenience and does not endorse or guarantee the content, accuracy or usability of such sites.
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