Potential Magazine March 2015 | Page 14

pay the way financial aid TEST YOUR FAFSA IQ TRUE OR FALSE: Savings for college under my child’s name will increase our financial aid. FALSE: In calculating financial aid for a dependent student, the formula uses 20 percent of the student’s assets (after deducting allowances). The formula only uses 12 percent of a parent’s. The ages of the parents are irrelevant in calculating financial aid. FALSE: Under current rules, a significant portion of a parent’s assets is deemed “protected” from being used to pay for college. The amount protected is based on the age of the older parent, with the benefit increasing with age. Here’s an example of how that works. If a two-parent family has $100,000 in assets and the older parent is 55, $46,800 of the assets will be protected. This means the balance of $53,200 will be used for the calculation and factored at 12 percent (the parent’s rate). A student’s income is so small that it is practically irrelevant in calculating financial aid while a parent’s income is the big factor. TRUE with a CAVEAT: A student’s income is calculated at 50 percent, while the parent’s income is n