When it comes to applying for financial aid for college, many students and their families have questions about how their financial situation will impact their eligibility. One common question is whether parents’ money in the bank affects FAFSA, the Free Application for Federal Student Aid. In this blog post, we’ll explore the answer to this question and provide some additional insights into how financial assets can impact financial aid eligibility.
What is FAFSA?
Before we dive into the question at hand, let’s first define what FAFSA is. FAFSA is a form that students and their families fill out to apply for federal financial aid for college. This aid can come in the form of grants, loans, and work-study programs. The information provided on the FAFSA is used to determine a student’s Expected Family Contribution (EFC), which is the amount of money the family is expected to contribute towards the student’s education.
Does Parents’ Money in the Bank Affect FAFSA?
Now, let’s get to the heart of the matter. Does parents’ money in the bank affect FAFSA? The answer is yes, but it’s not as simple as just looking at the amount of money in the bank account. The FAFSA takes into account a variety of factors when determining a family’s financial situation, including income, assets, and family size.
When it comes to assets, the FAFSA looks at both the parents’ and the student’s assets. This includes things like bank accounts, investments, and real estate. However, not all assets are treated equally. The FAFSA has an asset protection allowance, which is an amount of money that is excluded from the calculation of the EFC. This means that if a family’s assets are below the asset protection allowance, they won’t be counted against the family when determining financial aid eligibility.
The asset protection allowance is based on a variety of factors, including the age of the older parent, the number of parents in the household, and the number of children in college. For the 2021-2022 academic year, the asset protection allowance for a married couple with one child in college and the older parent being 48 years old is $6,840. This means that if the family’s assets are below $6,840, they won’t be counted against the family when determining financial aid eligibility.
It’s also worth noting that some assets are excluded from the calculation of the EFC altogether. These include things like retirement accounts (such as 401(k)s and IRAs), the family’s primary residence, and personal possessions (such as clothing and furniture).
Other Factors That Impact Financial Aid Eligibility
While assets are certainly an important factor when it comes to financial aid eligibility, they’re not the only factor. Income is also a key consideration. The FAFSA looks at the parents’ and the student’s income from the previous year to determine financial aid eligibility. This means that if a family’s income has decreased since the previous year (due to job loss, for example), they may be eligible for more financial aid.
Family size is another factor that impacts financial aid eligibility. The more people in the household, the more financial aid a family may be eligible for. This is because the FAFSA takes into account the number of people in the household when determining the family’s ability to pay for college.
Conclusion
In conclusion, parents’ money in the bank does affect FAFSA, but it’s not the only factor that’s considered. The FAFSA takes into account a variety of factors when determining financial aid eligibility, including income, assets, and family size. While assets are certainly an important consideration, it’s worth noting that not all assets are treated equally, and some are excluded from the calculation of the EFC altogether. If you’re applying for financial aid for college, it’s important to understand how your financial situation will impact your eligibility so that you can make informed decisions about how to pay for college.
