Will buying a car effect how much financial aid I will receive?
So I am a first year college student and my mom is my main provider and her yearly income is pretty low. When I filed out my fafsa, I only provided her information and not my dads since they're separated. Recently my mom bought a car with the money she's been saving for a few years plus the money my grandparents gifted her. She made a $20,000 down payment to reduce the monthly bill; we received a letter saying that any transaction of $10,000 or more will be reported to the IRS. I am concerned if that will affect how much financial aid I will receive. I did not know she did this until I got the letter however, she explained to me why paid so much for down payment. I am really worried if it will jeopardize my financial aid when I really need it. Can someone give me feedback on this?
- nancyLv 711 months agoFavorite Answer
The FAFSA is considered to be a "snapshot" of your family's financial situation on the day that you submit it. If you have already submitted your FAFSA, your aid will be based on the information that you provided at that time---it is not updated to reflect changes in assets that occur after you submit it. This makes sense, because what people have in cash, savings or checking accounts changes constantly. It simply wouldn't be possible to recalculate aid every time someone got a paycheck or paid a bill. So, if you've already submitted the FAFSA, this would have no effect on you at all. If you have not submitted it yet, it will actually benefit you because your mother would have less to report for assets. Many financial advisors actually advise their wealthier clients to make large purchases before doing the FAFSA for this very reason. Don't worry about the purchase being reported to the IRS. Schools do receive certain types of information from the IRS if parents use the Data Retrieval Tool to transfer their tax return information from the IRS onto the FAFSA. But the information that they receive is quite limited and does not include information about assets or the type of purchase your mother made. So, there is no chance that the IRS will report this to your school. That being said, if a school has reason to believe that you intentionally submitted false or misleading information, they have the power to request that you submit any documentation, including bank records, that they deem necessary to resolve the discrepancy. So, in theory, a school could request bank statements showing what your mother's assets were on the day you submitted the FAFSA, and require that it be corrected to reflect those assets. But that would be very unusual--I've been in financial aid for close to 20 years and have worked at a number of schools and I've never actually seen that done. So don't worry about it.
- 10 months ago
The money your grandparents "gifted" your mom should be reported on your Mom's side of the FAFSA as "other untaxed income" for the year in which it was gifted. Any bills your father pays for the household should be reported there as well. If they separated after 2018, ALL the household bills paid by him should be reported as your Mom's "other untaxed income". Worry about that - not banking law requirements!