Loophole increases financial aid eligibility
Money set aside in college savings plans won’t be counted in determining a dependent student’s eligibility for need-based financial aid, if the account is in the student’s name, thanks to a loophole in a new federal law.
The loophole is reflected in a proposed revision of the Free Application for Federal Student Aid (FAFSA), which the U.S. Department of Education took comment on through Aug. 7.
The FAFSA is the standard application form that the federal government, state governments and most colleges use to determine a student’s eligibility for financial aid.
Under previous law, money placed in college-savings plans, even under a student’s name, could shrink a student’s financial-aid award.
There is some confusion about whether Congress meant to create the potential loophole or whether it arose from a drafting error.
