Should Social Security survivor benefits in a Representative Payee account be reported on FAFSA?

I had this exact problem 2 years ago with my son's survivor benefits from his dad. I called FAFSA and was on hold for 2+ hrs before getting disconnected THREE TIMES!!! It was SO frustrating!!!! Finally someone told me that because it's a representative payee account, it's considered YOUR asset (the parent) not the student's asset. parent assets only count at like 5.6% against aid vs student assets at 20% so thats better for ur aid calculation.

This is a common question that creates confusion. Here's what you need to know: The Representative Payee account should be reported as a PARENT asset on the FAFSA, not a student asset. While the funds are technically for your stepdaughter's benefit, you maintain legal control as the representative payee, which is the determining factor for FAFSA reporting. The source of the funds (Social Security) doesn't exempt them from reporting. The FAFSA looks at who controls the asset, not where the money originally came from. Parent assets are assessed at a much lower rate (maximum 5.64%) compared to student assets (20%), so this is actually beneficial for your aid calculation. Make sure you include it in the "Cash, Savings, and Checking" section of the parent assets.

my brother got ss benefits after our dad died and we thought we didnt have to report it because its government money but financial aid office said we were wrong and made us fix our fafsa. realy messed up our aid package that year

To answer your follow-up question - yes, when your stepdaughter turns 18, the account would typically become her asset for FAFSA purposes since she'll gain legal control of the funds. This is why many families with Representative Payee accounts face a decision point as the student approaches 18. For current monthly Social Security survivor benefits (not the saved amounts): these count as untaxed income on the FAFSA and must be reported in the "Untaxed Income" section. This applies to benefits received in the prior-prior year being reported on the FAFSA. For the saved amounts: as others mentioned, this is currently a parent asset, but will become a student asset once she gains control at 18. One strategy some families consider is using the saved Representative Payee funds for permitted educational expenses before completing the FAFSA. This might include purchasing a required computer, paying for college testing and applications, or other qualified educational expenses that the Social Security Administration allows.

Wait I'm confused...are we talking about the savings from the benefits or the actual monthly payments? Aren't those different things on FAFSA?

This is SO STUPID!!! Social Security benefits are supposed to HELP children who lost a parent, not PUNISH them by reducing financial aid!!! These benefits shouldn't be counted at all. The system is completely broken. My daughter's college fund from her grandparents cost us $10,000 in financial aid. EVERYTHING counts against you no matter how hard you try to prepare. 😡

FAFSA professional here. Let me clarify this situation definitively: 1. Representative Payee accounts are reported as parent assets until the beneficiary gains legal control, typically at age 18, at which point they become student assets. 2. The assessment rate for parent assets maxes out at 5.64% vs 20% for student assets in the SAI formula. 3. Monthly Social Security survivor benefits received by the student in the prior-prior year are reported as untaxed income to the student under "Student's Untaxed Income". 4. There is no special exemption for Social Security benefits or their accumulated savings in a Representative Payee account on the FAFSA. 5. Important note: For the 2024-2025 FAFSA, there will be an increased Asset Protection Allowance for parents, which may shield some of these assets from being counted, depending on the parents' age and financial situation. Strategies to consider: spending down the account on qualified educational expenses prior to filing FAFSA, transferring the funds to a 529 account (which would still be a parent asset but is designated for education), or using the funds for the student's first year expenses before filing subsequent FAFSAs.

Regarding your question about 529 transfers - it's likely too late for significant tax advantages if you're applying for the 2025-2026 academic year, as you'd be filing your FAFSA soon using 2023 tax information as the base year. However, if your stepdaughter will be attending college for multiple years, establishing a 529 now could still benefit years 2-4 of her education. A potentially better strategy in your specific timeframe would be to use some of the Representative Payee funds for legitimate educational expenses now, before filing the FAFSA. This could include: 1. ACT/SAT testing and preparation 2. College application fees 3. College visits and related travel expenses 4. Technology required for education (computer, software, etc.) 5. Any required educational equipment or materials for her current studies All of these would be permitted uses of Social Security survivor benefits, would reduce the reportable asset amount, and would pay for expenses you'd likely incur anyway.

Does anyone know if this same rule applies to VA survivors benefits? My kids get those and I've been saving them in a separate account too...