WHY YOUR ASSETS ACTUALLY MATTER

Let’s say you’re saving money for college. You keep it safe in a bank, you don’t touch it, and you know you’ll have it safe to spend on any of your college expenses. Sound about right?

Wrong.

Here’s why: as a student, your assets are included in your FAFSA application, and can actually make a difference in your financial aid awards. This makes sense in theory, because if FAFSA pulls from your parent’s or guardian’s income to pay for college, they should do the same for the income and assets of students since they are the ones actually attending school. However, there’s one huge difference in theory and practice. This sounds nice, until you realize that a student’s income and assets directly add to your EFC.

As we know, your EFC is the number that financial aid offices use to determine your financial aid award amount. The logic behind the direct addition to the EFC is that a student typically attends a college for four years. Since this hypothetical student should exhaust all their personal funds to pay for school (yes, this is actually the way it’s calculated), 25% of a student’s income and assets should be directly applied to the EFC. Yes, you read that right.

Here’s an example. My first year of college I expected I would qualify for a Pell Grant because of my family’s limited financial assets. To qualify, your EFC must be below $5,920 (which is subject to change). My FAFSA EFC in 2013 was $9,409. I found that the only reason it was above the limit for the Pell Grant was because my mom took money out of her retirement for my college expenses so that looked like extra income, and my $6,000 in my savings account directly added $1,500 to my EFC. Those savings were all going to be used in my first tuition payment, but they were half the reason I wasn’t qualified for thousands of dollars of aid!

Thankfully, there are ways to make decisions that influence your EFC more favorably.
To be clear: you should never omit information for FAFSA. That would be a crime.
But there are a few things you can do! For example, use those savings on material objects that you need anyway. For example, buy your laptop or dorm items before you apply for the FAFSA. Or choose that time to buy a car. Just understand that $0.25 of every single dollar to your name is going directly to your EFC.

​If you have any questions or other ideas, feel free to share!