Unexpected windfall

January 10, 2007 11:27 AM

My boyfriend recently received $25K as part of a settlement after his father's death, and he'll be filing the FAFSA for graduate school soon.

This question begins to address some options, but I'm wondering how adversely he'll be affected by the influx of cash. How important a factor is the bank statement in determining his EFC?

Right now the money is sitting in his bank account. Does he have any options for investing it that won't count as assets? Does he have time to do this (I know the IRA option requires more time)? Does he have any favorable options for next year?

He makes about $37K a year, little else by way of savings, if that affects anything. Thanks in advance.

posted by hamster to work & money (6 comments total)

If he makes 37K already (before the +25), he's not likely to get a whole hell of a lot of financial aid anyway. Most college and grad students are broke broke.
posted by chrisamiller at 11:39 AM on January 10, 2007

There are a few sites out there that offer specific guidelines for which assets are considered protected and not taken into consideration when the Feds look at your income and overall net worth.

I would do a search under FAFSA tips and such. However, I'm afraid that chrisamiller is correct, as I am in the same boat and if hes a single man with an AGI of 37K, he's probably screwed out of anything but Stafford Loans.
posted by Asherah at 11:53 AM on January 10, 2007

chrisamiller:

Certainly they're going to look at income, but aren't they going to take into consideration that the guy can't work full time (and possibly not at all, depending on the program he's undertaking) while in school? It's been quite a while since I applied for student aid, but I seem to remember this principle popping up somewhere in the process.
posted by Clay201 at 12:31 PM on January 10, 2007

Clay: I don't think they take that into consideration. A guy I know works full-time, has his own apartment, and also goes to school full-time for mechanical engineering, and he says he really doesn't get a hell of a lot of aid.
posted by Verdandi at 12:39 PM on January 10, 2007

Try something like this Unofficial fafsa calculator. There are lots of them scattered around the web.

According to that, you'll probably only qualify for unsubsidized stafford loans, which don't require payment until you're out of school, but do accrue interest while you're in school.

This one is a bit more detailed, but says the same thing. The 25 grand isn't going to hurt or help him, since his EFC is already equal to the cost of tuition.

Bottom line: If you have ANY decent income, you're at the bottom of the list as far as subsidized student loans go. Most people going into grad school not only have almost no income, but have massive debt from undergrad. Is this fair? Maybe, maybe not, but it's the reality of the situation.
posted by chrisamiller at 2:01 PM on January 10, 2007

They will not take into account if you are going to be working when you are actually in school, there isn't even an indirect question on the FAFSA about this. They only ask you if you would be interested in work-study as well as student loans.

This is my main problem with the whole process...along with the fact that they don't look at your place of residence (location, cost of living there, etc.) when calculating your EFC (expected family contribution). Everyone gets the same living allowance subtracted from their income/net worth regardless if you live in a rural community in Kansas or Westside L.A.

For example, my AGI will be roughly 33K this year, I've already submitted by FAFSA. Retirement accounts and IRA are not included in the assessment per FAFSA guidelines. So after taxes, I'm taking home a little under 24K. They calculate my EFC at $9,800, which means of the 24K I take home, they expect my family (e.g. ME) to contribute about 10K of that to my education. Leaving me with roughly 14K to live on, if I was going to be working when I'm in school which I'm not.

So ideally, one year into my 2-year program, I'll be broke enough (income approximately nil) to qualify for some $$$, maybe. Hell, it could be worse.
posted by Asherah at 2:56 PM on January 10, 2007