Author Topic: Kids heading to college & effect of investment choices on financial aid?  (Read 1888 times)

Mama Minou

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Any Mustachians out there with kids in college or going soon, I would appreciate your insight into investing in way that optimizes chances for need-based financial aid.

My situation: one son certainly off to college in two years and another two years later. I earn about 50k and my husband's self employed income is highly variable, but about half that or less.

We have almost nothing in college savings...sigh. I have been prioritizing retirement for the last few years as our income has risen, having heard that's the better strategy. I expect both boys will work some and we will help, but the crux of my question is this.

Now that I have about $500 to invest each month, where can I put it to do the most long term good while not negatively affecting the possibility of educational grants and loans? I would like to start investing in Vanguard index funds, but I' m not sure how that will factor in.

Right now all my savings are in retirement accounts and I've been prioritizing paying down the mortgage (4.25) , since home equity and retirement don't count as assets for the FAFSA. Now I'm maxing out retirement, and i know index funds will do better long term than the mortgage...but I don't want to decrease what they could qualify for.

Ideas, advice, please?

randymarsh

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I just completed my FAFSA for next school year. Any assets in taxable accounts (and checking and savings) will have to be reported. But assets in retirements accounts (401K, Roth) do not.

At your income level though, I'm not sure he'll qualify for much in terms of grants and other need based aid. I only had to report one parent's income (similar to just yours) and I live in 3 person household, with me being the only college student. I usually get around $500 a year in need based aid. The rest is loans. Your situation is a little different since you'll have 2 kids in school at the same time, but in my experience, the need based aid goes to those with really low incomes.

I do know that assets in the student's name are weighted more heavily, so try to keep whatever saving you do in you and your husband's name.

Mama Minou

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Maybe, if they won't qualify for much aid anyway, I shouldn't worry about trying to save only in protected places (eg on the mortgage)....and invest where I'm likely to get better returns.

Harvard offers full financial aid to families earning less than $60,000 a year.