When Grandma Moves In, Does It Help or Hurt Financial Aid Eligibility?

When Grandma Moves In, Does It Help or Hurt Financial Aid Eligibility?

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

care.

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

income.

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

already retired.

The federal need analysis formula includes an asset protection

allowance 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.

Source: Fastweb

from Student Loan Debt Relief Now http://ift.tt/2vsvKRX
via Student Loan Debt Relief Now