roth ira (in student's name) and financial aid

i'm a student at a private university.

i checked my financial aid package to find these changes:

my 'university general scholarship' went from $3000 to $333

i suddenly became ineligible for the federal perkins loan (which doesn't accrue interest while enrolled) and now am being offered an unsubsidized stafford loan (6.8%) for $3500.

i was told that these changes occured because last year i reported $0 in assests (true) and this year reported $6000 in my savings account (true)

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i was saving the money so i could place it in a Roth IRA.

will money saved in a Roth IRA be calculated on the FAFSA the same as a savings account? both of these accounts would be in my name

Nineteenyears,

Everything I have looked at indicates the ROTH IRA would not be used in FAFSA calculations.

It appears your mistake was having your money in your savings account.
Had you opened your ROTH IRA the money would be protected from the calculations and growing for your retiment years.

But $6,000 is too much for an annual contribution to an IRA for you. The most you can contribute for 2006 is $4,000.

Joe Hurley keeps a web site titled Savingforcollege.com. He is a recognized authority on the subject of college expenses and paying for college.

Here is a link to a page on his site that may answer your question much better than I can. http://www.savingforcollege.com/financial_aid_basics/financial_aid_and_your_savings.php

19Y

The decrease in your financial aid is about right - student assets are assessed at approximately 45%. Federal financial aid assumes that money you have saved is money that you should be able to make available to help fund your own studies - I think, all in all, a reasonable assumption.

Retirement accounts, including Roth IRAs, are not included in the FAFSA even if they are in the name of the student. So your assets would have been "protected" if you had had the money in a Roth prior to filling out the FAFSA.

Note, however, that universities offering nonfederal financial aid can apply other standards for the award of that aid. So putting money into a Roth will not necessarily remove it from all consideration for financial aid, just federally funded.

This is one of those things you have to write off as a "live and learn" experience, I am afraid.

Note that if you money into a Roth IRA, do not plan on withdrawing that money when there is still a chance you will be applying for financial aid. FAFSA counts IRA withdrawals, including nontaxable withdrawals, as income.

See http://www.finaid.org which has several sections on how to help improve your chances for financial aid.

Hope this is of some interest.

TJ