personal savings affect Stafford Subsidized Loan?

[Retro]

Hi, I was wondering whether having personal savings exceeding 40K may hurt my Stafford Subsidized Loan eligibility? I talked to the financial aid office in my school and they told me that it will only affect the financial aid/scholarship eligibility, which I don't qualify regardless of my personal savings because of my parents' income, and it won't affect the amount of loan that we are eligible to receive. But I need some confirmation because if it indeed will affect my stafford loan eligibility, I will go buy a house or a car with that money instead. Thanks.

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[scifi]

i have another question to add to that: how do they confirm how much you have in your savings accounts anyways?? it's not on the IRS tax forms you fill out, so do you need to send bank statements or something?

 

[mpp]

Your personal savings will affect your EFC. The financial aid office will use your EFC to determine your eligibility for subsidized Stafford loans. You will still be elegible for unsubsidized Stafford loans. You are correct in that you can effectively 'hide' your savings by buying things with it, including a home. What you put on your FAFSA is on your honor so you don't have to confirm with any backup paper work like bank statements or tax forms.

 

[CoverMe]

Just my $.02 on this one... "hiding" the 40k can be a bit trickier than it seems. First of all, if you're industrious enough to have saved 40K, you realize what a poor "investment" a car would be.

Buying a house is a much better investment, but will find ways of appearing on your 1040... home loan intrest deductions, improvement deductions etc etc. Even modestly invested savings will have earnings (perhaps not like the mid 90's... but some ) and that must also be claimed on your tax returns.

It then becomes an issue of how to "hide" the money... whether by transfer to another (trusted) party like your parents... (transfer has an entirely different set of somewhat complicated rules), or somehow investing it in such a way that the "benefits" of such a transfer don't affect anything that shows up on your FAFSA. Essentially, money laundering 101. Consider it an experiment in economics and social sciences

I don't have any suggestions, just a word to the wise that hiding that amount of money in an "investment" isn't as simple as it sounds. You want that money to work for you, which will show on your 1040, which will then show on your FAFSA.

Perhaps a joint meeting with your parents and their financial advisor would be the best path?

on the OTHER hand, I just wish i had your problem!!!

 

[Retro]

Yup, your suggestions are great, and I have proceeded to "hide" my hard-earned savings in my parents' account. A note about checking your savings by FinAd: I heard that about 10% of the applicants are required to submit the tax return, which includes the interests that I have earned. I think they can figure out about much money approximately was in your account by using the average interest rate and calculate back. So I don't want to take any risks, I am saving that money to buy a house in ten years (can't buy one now because within four years, I may loose additional 5000 - 10000 bucks through buying versus renting. I heard the real estate bubble may burst anytime now... So I will wait at least one years to see what happens. Thanks again, guys.

 

[mpp]

Unfortunately, putting the money in someone else's account qualifies as a 'gift' and therefore the non-excluded gift amount ($18,000 in this case) is taxable income to your parents. And then the money will be taxed again when they return the money to you. However if you have 4 friends/family members you can trust you can each give them $10K to hold onto without it being a taxable event. (The limit for 2003 is $11K).

As far as a home showing up on your FAFSA, this is not entirely true. Typically in medical school you will have little to no income and therefore no interest deductions to make (you can't deduct from $0 income). Even if you earn some income, chances are the standard deduction will bring your AGI below a taxable level especially with the education credits available these days and it is easier not to itemize.

In addition, your income from this past year will show up on this year's FAFSA regardless of what you do with your savings and your EFC will probably be high anyways. As far as the real estate market, only a crystal ball will be able to determine what's going to happen. There are definitely some hyperinflated home prices in certain regions, but in others the market has been relatively stable.

On the other hand you could just as easily spend that 40K on a big weekend in Vegas. But perhaps spending it on medical school tuition is a better idea. Good luck...

 

[milanrp]

I haven't analyzed the various options but a quick addition to the conversation:

You can buy and hold gold bullion without reporting to gov't (don't know how legal, but the dealer does not report the transaction), but might have to explain outflows from account if large and inflows to account when you time the sale of bullion back to cash. Plus the risk of gold price movements. I'm sure there is a way to use to ones advantage if adequate time to "plan" that might be legal.

Again, don't know all the facts but am almost 100% certain that gold dealers do not report transactions (not required to). Probably illegal to not report them as assets though.

I have dealth with reputable dealer on two occasions if anyone wants info - PM me.

 

[spooky42]

I think that even with the 40k you can still get the subsidized stafford. Altough if you had a decent income last year then you might not get it. Since I only worked part time last year they gave me the 8500 subsidized.

 

[twester]

Gee, I wish I had 40K. Instead of sinking deeper into debt, I could invest the money in my education and get back on my feet quicker after graduation. Not to mention not having to worry about being caught with my pants down around my ethical ankles - so to speak.

Troy

 

[medduck]

Hi, I was wondering whether having personal savings exceeding 40K may hurt my Stafford Subsidized Loan eligibility? I talked to the financial aid office in my school and they told me that it will only affect the financial aid/scholarship eligibility, which I don't qualify regardless of my personal savings because of my parents' income, and it won't affect the amount of loan that we are eligible to receive. But I need some confirmation because if it indeed will affect my stafford loan eligibility, I will go buy a house or a car with that money instead. Thanks.

Don't worry. I had over 100K in an investment account and declared it on FAFSA. I was still eligible for the 8500 subsidized Stafford and gladly took the interest free money.

 

[OSUdoc08]

Hi, I was wondering whether having personal savings exceeding 40K may hurt my Stafford Subsidized Loan eligibility? I talked to the financial aid office in my school and they told me that it will only affect the financial aid/scholarship eligibility, which I don't qualify regardless of my personal savings because of my parents' income, and it won't affect the amount of loan that we are eligible to receive. But I need some confirmation because if it indeed will affect my stafford loan eligibility, I will go buy a house or a car with that money instead. Thanks.

?? You don't have an EFC if you are a graduate student. Having a bachelor's degree automatically designates you as an independent student, allowing you to have the full amount of loans offered.

 

[John Deere Gree]

what about putting the $40K into a joint account with you and your parent's name on it, and then a little while later taking yourself off the account so it's in your parent's name only?

 

[mpp]

Then it would be a gift...subject to tax.

 

[jake2037001]

so could someone answer some questions for me:

1) if i'm going to hide my savings in someone else's account, when do i have to do it by? 1 day before filling out fafsa? 1 month? 1 year?

2) how long does it have to stay hidden? can i put the money into my account 1 day after getting my loan? or does it have to stay hidden for 1 year? for all of medical school?

 

[mpp]

so could someone answer some questions for me:

1) if i'm going to hide my savings in someone else's account, when do i have to do it by? 1 day before filling out fafsa? 1 month? 1 year?

2) how long does it have to stay hidden? can i put the money into my account 1 day after getting my loan? or does it have to stay hidden for 1 year? for all of medical school?

The FAFSA asks your assets at the time you fill it out. You have to refile a FAFSA each year you are requesting aid.

If the amount in your savings account is more than $11,000 (and you are single) then each time you change account holders, the money will be subject to a tax.

 

[Taurus]

Put it in your Swiss bank account. Problem solved.

 

[DrB]

You are all sneeky people! We should not be talking about this... What to do with 40K???? How about invest it in your education? How about invest in my education?

I wish I had this problem too; however I am just another broke student.

My only option is loans, or maybe I will rob a bank?

Hey lets discuss the best way to pull off a bank heist!