Emergency fund cash and FAFSA/college

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Emergency fund cash and FAFSA/college

Post by jb3 »

My emergency fund is 100k in an Ally savings account.

My kids will start college in 4-5 years. My understanding is this will count against me with the FAFSA, when the time comes. I have no other taxable accounts.

Should I have my emergency fund somewhere else?
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Re: Emergency fund cash and FAFSA/college

Post by Minty »

It depends on whether you expect need-based grant aid for your children which will turn on overall income and assets. You can play with an expected family contribution calculator to get a sense of where you stand; here's one. In some cases, it pays to put the 100K into your mortgage and use a HELOC for your emergency fund. But certain fancy schools offering substantial need-based grant aid often use a more intrusive and comprehensive form called the CSS, which looks at home equity.
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Re: Emergency fund cash and FAFSA/college

Post by Pdxnative »

Schools usually have an asset allowance when calculating need-based aid. The amount varies by school and other factors. Most schools will assume around 5% of assets above that allowance held in non retirement accounts will be available for college. As mentioned, treatment of home equity varies. But, worse case, your 100k emergency fund would decrease aid by 5-6k/year. And at a school with an asset allowance of 50k, it’d only make a 2-3k difference.

Of course, the question is whether your kids will be interested in a school that provides significant need based aid. Those that provide the best aid tend to be the most selective. But merit aid is often a great option for bright kids and your assets aren’t relevant there.

I wouldn’t get too caught up in FAFSA as it’s primarily used to determine eligibility for federal aid. As mentioned, schools use their own forms or CSS when determining institutional need-based aid.
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Re: Emergency fund cash and FAFSA/college

Post by SchruteB&B »

I would pick 3 schools, including a public in state option. Google the school name and Net Price Calculator. Input your financial info. What do the calculators tell you? Now run them again with the 100K gone. Does it change anything?
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