What Happens If You Don't Report Assets on the FAFSA?

<b>I'm doing everything possible to lower my EFC. I have assets, UTMA, mutual funds, stocks and I know they hurt my chances of receiving free money (Federal or state grants). I was thinking of cashing in the assets and putting them in a safety deposit box. That way I won't have to claim them on the FAFSA because they are no longer assets. I have two children who will be attending college. The age difference of the two is six years. Which means they won't be in college (hopefully) at the same time. Is this legal to do? If not, what are the consequences if I do this. Are there fines, penalties, etc.? I'm exploring all my options and if this way is illegal, then obviously doing it is out of the question. Any suggestions how to lower your EFC when you have assets that count against you? — Rich N. Failure to report assets on the Free Application for Federal Student Aid (FAFSA) is fraud. It doesn't matter whether you keep the money in a safety deposit box or stuffed under your mattress. Failing to report the money is still fraud, since you will be making a false statement on the FAFSA in response to the question about the "total current balance of cash, savings and checking accounts."

What are the penalties for lying on the FAFSA?

So, what happens if you lie on the FAFSA? According to the U.S. Department of Education, falsifying information on the FAFSA could result in a fine of up to $20,000, jail time, or both. These penalties apply both to attempting to receive and to the actual receipt of student aid through fraud, false statements, or forgery. You will also be required to return all student aid, making it more difficult to pay for college in the long run. Finally, some colleges will even expel students who submit false information on their financial aid applications, as it is a violation of their honor code. As you can see, it’s a serious offense. You are very unlikely to get away with lying or skipping the assets questions on the FAFSA. College financial aid administrators have truly seen it all and have must more experience in detecting false information than you have in falsifying your FAFSA application. Also, cashing out your assets will generate capital gains that show up on your income tax returns. If your assets are inconsistent with your income or interest/dividend income is inconsistent with reported assets, the college has the right to ask for several years of income tax returns and account statements.

What happens when your FAFSA is selected for verification?

Though this sounds like an audit, it’s referred to as a FAFSA verification. A FAFSA audit is intended to ensure all information is accurate and no FAFSA mistakes or errors have occurred. If the financial aid office finds that you’ve been falsifying information, they are required to notify the General at the U.S. Department of Education for possible prosecution. If you are selected for FAFSA verification, you will be asked to provide more documentation. This verification request can come from the school you will be attending (school-requested verification) or from the U.S. Department of Education. Verification could be financial, identity or statement related. According to Studentaid.gov, colleges will not ask you to verify income or family size; only the U.S. Department of Education’s Federal Student Aid office will ask for income verification.

Documents You May be Asked to Verify

Tax Information

Number of People in Your Household

Supplemental Nutrition Assistance Program (SNAP) Benefits

Child Support

High School Diploma or GED

Complete the FAFSA Verification Worksheet

Once you have gathered all the requested documents, you will be asked to complete and submit a verification worksheet.

Submit Your FAFSA Verification Materials

Be sure you include or attach all verification materials requested along with your verification worksheet.

Look for Changes to Your Financial Aid Package

Once the verification process has been cleared, be sure to contact your college financial aid office to review your latest financial aid award package. You will want to look for any adjustments that may have resulted from the verification process. According to Finaid.org, “If an applicant uses the IRS Data Retrieval Tool to transfer federal income tax return data to the FAFSA without modification, the unmodified data elements will not be subject to verification. Accordingly, applicants who use the IRS Data Retrieval Tool are less likely to be selected for verification.” It's also pointless to try to hide assets. Typically, when a parent has assets to hide, their income on its own is sufficient to prevent the student from qualifying for the Pell Grant as well as state grants. The need analysis formula is more heavily weighted toward income than assets. There are ways that you can maximize your aid eligibility legally. For instance, you can covert the UTMA account in a 529 college savings plan. For more strategies on how to maximize aid eligibility, check out our advice here.

What is counted as an asset on the FAFSA?

A record of your family’s finances, or assets, is necessary to determine how much financial aid you will receive. The value of your assets is used to determine your EFC or Expected Family Contribution. The FAFSA uses a formula to determine your financial need to attend college. Your EFC will be deducted from your COA or Cost to Attend college to determine your financial need.

Reportable Assets

Below is a list of assets to be reported on your FAFSA: • Cash • Businesses or farms owned • Investment Farms • Other investments • 529 savings accounts owned by the student or the student’s parents

Non-Reportable Assets

Below is a list of assets that do not need to be reported on your FAFSA: • Primary residence or farm • Custodian UGMA and UTMA accounts • Life insurance • Able Accounts • Retirement savings • 529 account distributions