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You’re applying to colleges and finally got to the part about financial aid. Calculating financial need is a complicated process. There are so many factors that go into it that families might not always expect. One of these factors, your parents’ college savings accounts, is frequently an area of great concern to parents and students alike. What if all those college savings decrease your chances for receiving financial aid? When you fill out the FAFSA (or other financial aid calculators), there will be many questions concerning both your income/assets and your parents’ income/assets. These factors are used to calculate your EFC, or expected family contribution. Colleges determine financial need from the cost of attendance to your school of choice. That will change from school to school—minus your EFC.
Does My Parents’ College Savings Affect My Financial Aid?
When it comes to college savings and how they affect your EFC, there are a few things to keep in mind. Expect around 20% of a dependent student’s income and assets to go to education. This is because the government assumes that most college students are not saving for retirement or life insurance at this point. Assume education is the primary focus, and therefore a student’s monetary priority. Parents, however, are expected to contribute a much lower percentage of their assets: 5.64%. And that is of their unprotected assets.
What Does This Mean?
So what does this mean for your financial aid packages? If college savings accounts are in your name rather than your parents’, they will be factored in at a higher percentage, therefore lowering the amount of financial aid you would receive. However, those same college savings accounts will have less of an impact if they are in your parents’ name. It might be beneficial to look over these assets with your parents during your early years at high school.
What About Other Relatives?
Some of you might also have grandparents or other relatives wanting to help with college costs. Give careful consideration at this point. Money from these sources is likely considered untaxed income on the student’s part. This means that the reported income from the student will go up on the following year’s FAFSA. As a result, it increases EFC and decreases financial need. Remember, income plays a large role in calculating EFC. Generally, a larger one than the amount of assets you have squirreled away.
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Regardless of how much money your parents’ savings account has, apply for financial aid! Fill out the FAFSA. There’s a common misconception that students in higher financial brackets won’t qualify for aid, and that’s not true. Filing the FAFSA opens you to merit-based scholarships and grants that you don’t want to miss out on. No matter how much your parents saved up, any money you won’t have to repay can go towards building your life after college.
Use College Raptor to discover personalized college matches, cost estimates, acceptance odds, and potential financial aid from schools around the country—all for FREE!
| Lender | Rates (APR) | Eligibility | |
|---|---|---|---|
 |
5.34%-15.96%* Variable
3.99%-15.61%* Fixed
|
Undergraduate and Graduate
|
VISIT CITIZENS |
 |
4.92% - 15.08% Variable
3.99% - 15.49% Fixed
|
Undergraduate and Graduate
|
VISIT SALLIE MAE |
 |
4.50% - 17.99% Variable
3.49% - 17.99% Fixed
|
Undergraduate and Graduate
|
VISIT CREDIBLE |
|
|
6.00% - 13.75% Variable
3.99% - 13.75% Fixed
|
Undergraduate and Graduate
|
VISIT LENDKEY |
 |
5.50% - 14.56% Variable
3.69% - 14.41% Fixed
|
Undergraduate and Graduate
|
VISIT ASCENT |
 |
3.70% - 8.75% Fixed
|
Undergraduate and Graduate
|
VISIT ISL |
 |
4.99% - 16.85% Variable
3.47% - 16.49% Fixed
|
Undergraduate and Graduate
|
VISIT EARNEST |
 |
5.00% - 14.22% Variable
3.69% - 14.22% Fixed
|
Undergraduate and Graduate
|
VISIT ELFI |
