Are you worried that saving for college will ruin your chances for financial aid?
Parents who save for college are almost never penalized in student financial aid considerations. In fact, only about 4% of families who complete financial aid forms are penalized for their savings.
Here are the two biggest reasons why saving money shouldn’t hurt your financial aid chances:
1. Colleges don’t care how much you saved for retirement.
And that’s true whether your child ends up applying to a state university or a private college. The Free Application for Federal Student Aid (FAFSA) doesn’t even ask about retirement assets whether the cash is in 401(k) plans, Individual Retirement Accounts, SEP-IRAs or other retirement plans. Even if you’ve saved $1 million for retirement, or heck, $1 billion it wouldn’t hurt your chances of financial aid.
The 270 private colleges that use CSS/Financial Aid PROFILE, also don’t penalize parents for their retirement savings.
2. Parents can also shelter non-retirement money.
Colleges don’t want to strip you of all the cash. Really, they don’t. So the financial aid formulas will also let you shield a big chunk of your non-retirement money.
You will probably be surprised at how much money the FAFSA formula allows you to protect. It’s all based on the age of the oldest parents. Let’s say the oldest parent is 55. The family would be able to shield $60,200 in college account money, as well as any other cash laying around in taxable accounts such as checking and savings and brokerage accounts.
Oldest Parent Asset Allowance
- 45 $46,600
- 47 $48,900
- 50 $52,900
- 52 $55,500
- 55 $60,200
- 58 $65,300
- 60 $69,200
- 62 $73,200
The CSS/Financial Aid PROFILE also includes an asset allowance, but it’s not based on the age of the oldest parent. It’s more heavily weighted on the number of children a family has — whether or not they are college-age yet or not.
So what’s the bottom line? Savings will hardly ever hurt your chances of financial aid.