Do FAFSA calculations weigh student vs parent bank accounts differently?

Yes, student-owned assets are assessed at a higher rate than parent-owned assets in the FAFSA formula. Student assets are assessed at 20% while parent assets are assessed at a maximum of 5.64%. This means $10,000 in your friend's son's account could reduce aid eligibility by up to $2,000, while the same amount in the parents' account would reduce aid by a maximum of $564. The 2024-2025 FAFSA simplified some things but this particular aspect hasn't changed. If maximizing aid is important, they might consider moving some assets before filing, but be careful about timing. Any large transfers close to filing could raise flags during verification.

when I filled out fafsa last yr they definitely counted my kids savings against us more than our own!! still mad about it tbh

To add some nuance to what others have said - student assets are indeed assessed at 20% vs. parent assets at a max of 5.64%, but there's also a protection allowance for parent assets (varies based on family size/age) while student assets have no protection allowance. Every dollar in a student's name counts, starting from the first dollar. Some important considerations: - Regular checking/savings accounts definitely count as student assets - UGMA/UTMA accounts count as student assets - 529 plans with the parent as owner count as parent assets (much better!) - If they need to move assets, it should be done well before filing - ideally before the calendar year in which they're filing The asset protection allowance has decreased significantly in recent years, making this issue even more impactful.

My son had like $12k saved up from mowing lawns and his grandparents and I swear it killed our financial aid. The financial aid officer at orientation literally told us we should have spent it all on a car or something before filing! Too late for us but tell your friend to move that money ASAP!!!!!

I've been helping families navigate FAFSA for 15+ years. The student vs. parent asset assessment rate difference (20% vs. 5.64%) has been a consistent issue. A few practical suggestions for your friend: 1. Consider legitimate expenses for the student before filing - computer, college visits, SAT/ACT prep, etc. 2. Pay attention to timing - assets are reported as of the day you submit the FAFSA, not based on year-long averages 3. Be honest in reporting - attempting to hide assets can result in verification issues or worse 4. Remember some colleges (especially private ones) use the CSS Profile which has different asset assessment rules 5. Understand that retirement accounts and primary residence equity are NOT counted as assets on the FAFSA Strategic financial planning should happen well before senior year for maximum benefit.

Has your friend tried calling the Federal Student Aid Information Center to ask about this? We had a similar question last year and finally got an answer directly from them after trying for days. We ended up using Claimyr (claimyr.com) to get through to an actual person instead of waiting on hold forever. They have a video demo at https://youtu.be/TbC8dZQWYNQ that shows how it works. The agent we spoke with gave us very specific guidance about our son's assets versus our own, and it helped us strategize before submitting the FAFSA. Definitely worth talking to someone official about their specific situation.

The FAFSA system is DESIGNED to punish responsible kids while parents can hide money in retirement accounts and home equity!!! My daughter saved $15k for college and it cost her about $3000 in aid while my neighbor's kid spent every penny and got more aid. THE SYSTEM IS BROKEN! Don't get me started on how they also penalize divorced parents but completely ignore unmarried partners' income. The whole thing is a joke.

does anyone know if the student just spends the money on like a nice laptop before filing will that solve the problem? asking for...a friend lol

Thanks everyone for all the great advice! I'll pass this all along to my friend. Sounds like the key points are: 1. Student assets are assessed at 20% vs only 5.64% for parents 2. Moving the money to the parents' account well before filing is an option 3. Spending on legitimate college expenses before filing also works 4. Different schools might use different formulas (CSS Profile) It's frustrating that saving is penalized, but at least now she knows how to handle it. I appreciate all the help!

Just wanted to add that timing really matters here! The FAFSA uses a "snapshot" of assets on the day you file, so even if your friend's son had $10K in January but spent $8K on legitimate college expenses by March and then files in March, only the remaining $2K would count. Also, don't forget about sibling assets if there are other kids in the family - each student's assets are assessed separately at that 20% rate. We learned this the hard way when our twins both had graduation money sitting in their accounts. The silver lining is that once they start college and use that money for tuition/expenses, it won't be there for subsequent FAFSA renewals!

One thing that hasn't been mentioned yet is the Student Aid Index (SAI) protection allowance changes. With the 2024-25 FAFSA updates, they eliminated the student income protection allowance but kept the harsh 20% assessment rate on student assets. This makes having money in the student's name even more painful than before! Your friend should also know that if her son receives any scholarships that exceed tuition/fees/books, that "excess" scholarship money could be considered taxable income AND might count as student income on next year's FAFSA. It's like a double whammy. The whole system really does seem designed to discourage kids from saving, which sends such a backwards message about financial responsibility. If they do move the money to parent accounts, make sure it's done as a legitimate transfer for educational purposes, not as a "gift" which could have other tax implications if it's over certain thresholds.