Financial Aid and 401ks

[tbo]

I have a random question that I've always wondered for those that have had a career before going to med school. For financial aid and loans, how is your 401k considered? Would you ever be refused aid and "forced" to withdraw from a 401k? That would bite the big one. Anyone else ever get this question answered from anyone?

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[Lshapley]

God, I hope not. I just can't imagine anyone asking you, or even be allowed to ask you, to do this. You would have to pay the penalty for the withdrawal, too, unlike an IRA. Ugh, what a terrible thought...

 

[Doctor Bagel]

God, I hope not. I just can't imagine anyone asking you, or even be allowed to ask you, to do this. You would have to pay the penalty for the withdrawal, too, unlike an IRA. Ugh, what a terrible thought...

Quick answer -- they're not. Retirement accounts are not counted toward your assets when determining your financial need on a federal level. Neither is your primary residency. I have no clue if individual schools look at it to determine who should get need-based grants and scholarships, but again it has no affect on federal financial aid.

 

[ncalcate]

Quick answer -- they're not. Retirement accounts are not counted toward your assets when determining your financial need on a federal level. Neither is your primary residency. I have no clue if individual schools look at it to determine who should get need-based grants and scholarships, but again it has no affect on federal financial aid.

Bagel is 100% correct. Assets in my 401(k) or Roth IRA never came up in any of my FAFSA applications or for any applications for private scholarships. So therefore, you would never be forced to withdraw money from either of those asset categories.

Hope that helps. Good luck.

 

[AMDFAO]

A school can ask for the value of your retirement to determine your eligibility for their institutional money (grants or loans) but the question is not even asked on the FAFSA. It is asked on the CSS Profile app or another institutional app of the school's choosing, some schools do and others do not. I encourage my students to think about retirement early on with a Roth and have taken the attititude that if all the kids have an $8000 roth, they are all the same since I am ranking them based on their income and assets (financial strength). In other words, I wouldn't penalize for retirement assets but some schools view it differently.
When you as an FA are trying to help the poor kids, you may not award something to the kid with a $10,000 401 since you cannot expect me (the school) to spend my money to educate you if you won't spend your money to educate you-- it's not my education.
I wouldn't be quick to liquidate your 401 though. Your primary residence is the same way, not on the FAFSA but asked for on other apps.

 

[Lshapley]

Yep, AMDFAO is right. I received no grants from BU because I have $80k in my 401k. Unfortunately, it is my only asset and I already have debt at ~$50k.

 

[david594]

Bagel is 100% correct. Assets in my 401(k) or Roth IRA never came up in any of my FAFSA applications or for any applications for private scholarships. So therefore, you would never be forced to withdraw money from either of those asset categories.

Hope that helps. Good luck.

If money in a Roth IRA is completely ignored, would that make it one of the better methods to invest savings towards med school since it can be later withdrawn penalty free to pay for qualified higher education expenses?

 

[Sol Rosenberg]

If money in a Roth IRA is completely ignored, would that make it one of the better methods to invest savings towards med school since it can be later withdrawn penalty free to pay for qualified higher education expenses?

You can also withdraw $xxx/yr from a traditional IRA (penalty free) to pay for higher education expenses, so Roth vs. Traditional really doesn't make a difference.

I believe xxx = something like 20k, but I don't remember the exact figure.