Will having savings impact student financial aid?

Families typically use a variety of resources to pay for higher education including parent and student income, scholarships, need-based financial aid, tuition payment plans, and family savings. Lots of families wonder if saving for college will impact how much financial aid their student will get. The good news is that having parent savings doesn’t have much of an impact on financial aid eligibility (if at all!). Many families find that having savings gives them more options when choosing a college and makes paying the bill easier. 

Will saving in a 529 plan make me ineligible for financial aid?

When it comes to financial aid eligibility, your college savings may have little or no impact. A family’s income is the primary driver of federal financial aid eligibility, not how much they have in savings.¹ And, for most families earning less than $60k per year, sharing information about assets such as college savings aren’t even required on the FAFSA (Free Application for Federal Student Aid).

When a family is required to report assets (such as college savings), no more than 5.64% of the parents’ reported assets impact federal aid eligibility.¹ Student assets have more impact on federal aid eligibility (20%) but the good news is that for dependent students, a 529 account (even if owned by the student) counts as a parent asset.¹

→ Income is the primary factor in determining federal financial aid eligibility, not savings. So, if you hear that you shouldn’t save for college because you won’t get financial aid, don’t listen—that’s incorrect. The bigger risk is saving too little and not being able to cover the remaining balance.

Maximize college financial aid with FAFSA

The financial aid process begins with filling out the Free Application for Federal Student Aid (FAFSA). Think of the FAFSA as the key that unlocks financial aid. The FAFSA is used by all schools to determine eligibility for federal and state financial aid, and many schools also use it to determine eligibility for their institutional need-based financial aid. Many scholarship programs also require the FAFSA.

The FAFSA needs to be filed each year. Most high school students start the financial aid application process in the fall of their senior year in high school and can complete the FAFSA in less than an hour.

Some schools also require students to fill out additional forms, such as the CSS Profile® or their own school form. The CSS Profile is used by some colleges to award their own grant and scholarship money. 

→ Students have to file a FAFSA every year to be considered for financial aid. 

→ Some schools require an additional form. Check with the financial aid office for more information. 

FAFSA and financial aid deadlines

A word about deadlines. Many schools have different priority filing deadlines, with some awarding aid on a first-come, first-served basis. Make sure you know your school’s deadline—meeting priority deadlines is the best way to maximize your financial aid eligibility. 

Admission application options such as Early Action and Early Decision allow students to learn of their acceptance status sooner than the regular process. These options usually have earlier deadlines for all admission and financial aid applications, including the CSS Profile or other institutional applications. Some deadlines may be as early as October or November, so be sure to check the school’s website. Early Decision usually indicates that the student is committed to attending the institution and is willing to withdraw applications to other schools, if selected, so be thoughtful about your selection if you choose to apply early.

→FAFSA filing opens up on October 1 each year for the following academic year.

→The CSS Profile becomes available on October 1 each year for students whose schools require it. 

→Apply early and meet deadlines to maximize your financial aid eligibility.

Five Steps to Apply for College Financial Aid

Applying for college financial aid doesn’t have to be as overwhelming as it may seem. With a clear plan and some basic information, you can navigate the process smoothly and maximize your chances of getting the support you need. 

Here are the five essential steps you need to take to apply for financial aid, from preparing documents to submitting applications. 

Your first step is to pull together everything you need:

• Know deadlines and requirements. Make sure you understand the deadlines and requirements for each school. The federal deadline for filing the FAFSA is always June 30, but state and school deadlines can differ. Additionally, some schools have an additional financial aid application beyond the FAFSA.
• Create a Federal Student Aid Account at StudentAid.gov. You’ll use this username and password to access the FAFSA for all the years you attend school and to manage any federal student loans. Dependent students and their parent(s) each need their own StudentAid.gov account. Learn more about creating your StudentAid.gov account.
• Gather FAFSA information. There is information you will need to complete the FAFSA.
  Dependent students and parents need:
  • StudentAid.gov username and passwords—students and parents each need one. Multi-factor authentication is required, so you’ll need access to a mobile device to complete the login process.
  • Social Security number(s) and legal name(s) as they appear on each person’s Social Security card.
  • Dates of birth.
  • The previous year’s federal income tax returns (including all applicable schedules).
  • Asset information: Determine the current value for the following assets in case they need to be reported on the FAFSA:  cash, checking and savings accounts, real estate (NOT the home you live in), family farm (excluding the home if part of the family farm), businesses, stocks, bonds, and investment accounts (NOT retirement accounts), UGMA/UTMA accounts, and 529 college savings plans.

If you’re an independent student, you only need the above items for yourself (and your spouse if you’re married). Not sure if you are a dependent or independent student? Check out this handy guide from the Department of Education.

Once you’ve gathered your information, fill out your FAFSA at StudentAid.gov and submit it. You’ll find lots of information within the FAFSA to help you fill it out.

Here are some tips to keep in mind:

• Individuals required to log into the FAFSA to provide information are referred to as contributors. All contributors will need their own username and password to access their section of the FAFSA (student vs parent section). Keep your username and password in a safe place, as you will need them every time you log in to the StudentAid.gov site to access the FAFSA.
• The FAFSA is a roles-based form. That means the student will see student-related questions, while the parent will see parent-related questions. 
• Either the student or the parent can start the FAFSA. Whoever starts the FAFSA will invite the other contributor(s) to complete the FAFSA. When inviting a contributor, the person making the invitation must provide the legal name, date of birth, Social Security number, and email address of the person they are inviting to be a contributor.

Reporting 529 accounts

Wondering where the information about your 529 account will go on your FAFSA? Funds saved in a 529 account are reported on the FAFSA in the assets section under investments. For dependent students, 529 funds will be listed as a parent asset regardless of whether the parent or the student owns the account. Parents need to report only the value of the 529 account(s) for the student whose FAFSA they are completing.

→ 529 accounts owned by grandparents, other family members, or friends are not reported on the FAFSA and have no impact on federal financial aid eligibility. 

If any of the schools you are applying to require additional forms (such as the CSS Profile), complete those by the school’s deadline. The financial aid office at each school will be able to answer any questions you may have.

After you submit your FAFSA, Federal Student Aid processes your information. This typically takes one to three days. During this time, no changes can be made to your application. After your FAFSA is processed, Federal Student Aid will send you (only the student) an email with a link to your FAFSA Submission Summary (FSS). Review it carefully to make sure all the information is correct.

The schools you are applying to may request additional information—especially if you have been selected for “verification.” Make sure you respond to any requests by the deadline, which may be different for each school.

You did it! Congratulate yourself! Later in the year (after you have been offered admission), you’ll receive financial aid offers from the schools you’ve applied to. Take this time to sit back and enjoy your friends and the rest of your senior year of high school.

Have other questions about navigating the financial aid process or paying your bill? FAME is here to help!