Does a Savings Account Affect the Amount of Financial Aid Received?
Understanding the FAFSA
The FAFSA is the Free Application for Federal Student Aid. This is a document that you fill out and submit either online or by mail to see if you are eligible for financial assistance from the government for your educational needs. After filling out this form, your expected family contribution amount will be calculated. Your school will then take the cost of attendance, subtract your expected contribution, and use that number to determine how much in aid (grants, loans, scholarships) you are eligible for.
Benefits of a Savings Account
Starting a savings account for college, whether for yourself or a family member, is one of the smartest decisions that you can make for your future. With the rising cost of college and a fluctuating economy, it is becoming more and more difficult for financial aid to cover the entire cost of your education. Having a saving account will not only help you make up the difference in the cost of education, but it will also gain interest the longer the money is in your account.
A Savings Account Can Affect Financial Aid Received
Part of the FAFSA application will ask about other assets such as money in savings account. This number will be applied to the equation when calculating your eligibility for financial aid. Unfortunately, your savings account can affect your expected family contribution, which also lowers the amount of financial aid you are eligible for. However, if you have saved well, you will be more than able to make up that difference from your savings. Using your savings will also allow you to take out fewer loans. This will save you from having to pay interest on the loans at a later time. It is much better to make interest on your savings account now than to pay interest on your school loans later.
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