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

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

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.

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

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.

Source: Fastweb

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