financial aid Archives - The Free Financial Advisor

Will My Savings Account Affect My Financial Aid?

The short answer to that question is yes. Savings account balances will impact your financial aid. Money held in a savings account is considered an asset. And it does affect a student’s expected family contribution (EFC) calculations when they complete their free application for federal student aid (FAFSA).

However, the impact of a savings account may not be as dramatic as you’d think. It’s only part of a larger equation. Students aren’t expected to hand over their entire savings account balance to cover tuition.

What Has the Biggest Impact on Financial Aid?

While your savings account balance may have a slight impact on your financial aid package. Your income level is a bigger factor. It’s given the most weight when it comes to calculating college affordability.

If you are low-income, you’ll usually qualify for a substantial amount of support unless your assets are high. It would take a considerable amount of savings to completely wipe out your financial aid. Though technically wouldn’t be impossible.

It’s also important to understand that the cost of your chosen college plays a role as well. After completing the FAFSA, your EFC is compared to the estimated cost of going to that college. Thus, influencing the amount of aid that may be available.

How Much Does Savings Impact Financial Aid?

Generally, about 20 percent of a student’s savings account and other cash-oriented assets are counted on the FAFSA as being eligible for use when it comes to covering the cost of college. That means 80 percent is essentially protected from the equation.

For dependent students who are worried about the value of their parent’s saving, the math is even more in their favor. Less than 6 percent of those assets are viewed as potentially useable by the FAFSA.

Generally speaking, savings will potentially reduce how much you receive in financial aid. However, precisely how much of an impact it will have depends on a range of factors, including the total value of your assets, your income level, whether you’re a dependent or independent student, whether the savings is in your name or your parent’s names, and more. Often, the reduction is fairly minimal, as income level is the biggest determiner when it comes to how much a student receives in financial aid.

Making the Most of Your Savings

If the money you have set aside in savings is for college, then do put it toward your education. As that balance shrinks each year, it will have less of an impact on your EFC. As a result, if your income either remains largely unchanged or falls while you’re in school, you could qualify for more financial aid over time.

For dependent students who have money in savings but whose parents also set money aside for college, it’s best to spend your own money first. Personal savings has a bigger impact on your EFC than what your parents have in the bank, so it makes sense to spend the cash that’s saved in your name first.

Did your savings impact your financial aid? Did you decide to change how much you had in savings to secure more financial aid? Share your thoughts in the comments below.

Tamila McDonald

Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.

College students in America are facing a financial crisis.

According to the Center for American Progress, more than 13 percent of students who started loan repayment in 2009 wound up in default by September 2012. Another 26 percent of those borrowers were delinquent.

Ouch.

Many experts argue that the causes for these epidemic rates are systemic: College is getting more expensive, forcing students to borrow more, but the rising cost of college degrees is not being met by increasing value of those educations.

Many students who began loan repayment in 2009 entered into an economy that struggled to create new jobs for the youngest generation, resulting in an employment crunch where college education was not rewarded with the employment they merited. With horror stories running rampant, today’s prospective college student is increasingly weighing the cost of college against its supposed value. If you’re facing a similar situation, here are some financial considerations to keep in mind:

Consider the Total Costs

For many students, college is expensive. But there are other costs associated with college that are worth considering when weighing the total cost. For example, if you go to a school where you need to own a car, you’ll have to pay for the up-front cost of the vehicle plus maintenance, gas and insurance while you’re in school. That could easily up the price of college by thousands of dollars per year, depending on the vehicle.

And if you plan to live off-campus, the local cost-of-living might also factor in. Consider housing prices, food budgeting, and other situational costs that might affect how you consider the overall cost of attending one college over another.

How Does Financial Aid Vary?

Federal financial aid is typically awarded according to your family’s presumed ability to pay for college. This affects the federal grants you qualify for as well as the types of student loans you are eligible to borrow. Additionally, individual schools also have financial aid packages that can feature an array of scholarships and grants. Depending on the school you plan to attend, strong students can sometimes lobby for better financial aid packages.

Because your financial aid is likely to be different at every school, you need to get hard numbers from each institution, and use this aid to reassess your college options. One report by HCM Strategists identified financial aid packages and emerging aid channels as vital tools to make college more affordable. These tools help avoid the worsening student-debt crisis, so don’t ignore how these alternatives might create much-needed economic relief.

You can even receive financial aid if you enroll in an online institution, depending on your overall financial need. Contact your school’s admissions advisor for more information on state loans, personal loans, veterans’ benefits, and tuition reimbursement through your employer. The tuition reimbursement program is a great option for employers who want to invest in their employees and keep them around long-term.

Will You Get Your Money’s Worth?

When it comes to saving money in order to get more bang for your buck, students have a number of options available to them. They may choose to first attend a community college and complete general education requirements while the costs are low. It’s also helpful to keep online college courses in mind, particularly if you’re looking to maintain flexibility while juggling school and a job. Browse a directory of online colleges and programs to educate yourself on all of the options available to you. Scourge the web for all available online college resources you can find, and start comparing and contrasting each resource.

For Some, It May Depend on Your Major

A college education can offer job prospects and income opportunities that vary widely across different majors. According to a report from Georgetown University’s Center on Education and the Workforce, unemployment rates tend to be much higher for some courses of study than for others, as Forbes highlights.

Architecture graduates have the highest current unemployment rate, largely because the stagnant economy has deflated demand for new buildings. Not far behind are Arts, Humanities and Social Sciences, all of which have unemployment rates of 8.9 percent or greater.

Given those numbers, students might find it particularly risky to invest in an expensive education that offers poor income prospects and a high risk of unemployment. Degrees in business and other stable professions, on the other hand, are more likely to deliver a strong return, making it more practical to spend for a more expensive education.

Can My Savings Account Affect My Financial Aid?