Trust Fund - Effect on Financial Aid for College

Discussion in 'Budget Board' started by kath1210, Apr 20, 2006.

  1. kath1210

    kath1210 DIS Veteran

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    Does anyone know what effect a trust fund has on a child's eligibility for college financial aid?

    My mom died 2 1/2 years ago at the way-too-young age of 62. She left a trust fund for her grandkids for college.

    Her house just sold, and the profits are to be divided 6 ways for the 6 kids. My brother, the Trustee, is setting up 6 separate sub-accounts of the Trust.

    I know Mom would be upset if this hurt their eligibility for financial aid, because it is not a huge amount per child. The total amount per kid right now might cover only about 1 1/2 years of college.

    TIA!
     
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  3. my3kids

    my3kids <font color=blue>Helpful Cruise Board regular!<br>

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    It will be figured into the calculation. If it for college education, and it pays for the first year or two, then when it is gone it won't be figured into the equation anymore. She won't get need based aid when she isn't in need. But, a trust fund won't factor in merit based scholarships.
     
  4. kath1210

    kath1210 DIS Veteran

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    Thanks. I wonder if there is a way to set up the trust accounts so they won't be counted toward financial aid? It might be a violation of the trust agreement, though. I am mostly counting on being able to get student loans and don't expect grants or need-based scholarships.
     
  5. Lisa_M

    Lisa_M DIS Veteran

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    You can get federal stafford loans regardless of need. They are available to everyone. My suggestion is use the trust money first and then take out the loans for the remaining college time. You don't want interest to be collected starting in the first and second year to pay out of pocket for the 3rd and 4th year.

    Also, I don't really understand your logic... if you aren't looking for grants aka free money, then don't worry about how the trust money affects the EFC on the FAFSA
     
  6. my3kids

    my3kids <font color=blue>Helpful Cruise Board regular!<br>

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    Why would you apply for loans if you have the money available? In any case the cost of tuition is the same, regardless of if you pay cash or finance it on your own. If you are not applying for financial aid, they would never know your financial situation in the first place. If you are not trying for need based aid, you don't fill out the forms listing assets.
     
  7. kath1210

    kath1210 DIS Veteran

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    Thanks again for your thoughts. I was under the impression that even student loans required filing the FAFSA forms, and that they were no longer available if you could not show some need.

    I agree that I probably will not get loans until we have used up the trust funds, so I guess I was not thinking it through. Once the trust funds are gone, they won't be counted will they? Silly me! :crazy:

    Of course, the money my Mom left for the kids does not HAVE to be used for college, so if we can get low-interest loans, we may want to save the trust fund money for a down payment on a house or something else.

    Anyway, thanks again for your advice! :goodvibes
     
  8. Joan S.

    Joan S. DIS Veteran<br><font color=blue>Needs to 'fess up

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    HI, I was thinking along these same lines. If the money in the trust fund is growing at a better rate,than the lower interest Student Loans,you may want to take out the loans and leave the TRUST fund intact(to grow) and when college is over it can be used to pay the loans monthly. Or if a good paying job takes care of the loans the child will have a nice "nest egg" to start life with! Joan
     

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