Since the FAFSA considers parents’ income and assets when determining award eligibility, an inheritance could be considered a contributor to the family’s overall income.
While the federal government allows parent asset allowances of up to $50,000, a significant inheritance could make a student-applicant ineligible for Pell grants and subsidized loan options.
Your Options for Reducing the Negative Effects of a Large Inheritance
The FAFSA considers the prior year’s tax returns of the parents and applicant. You could reduce the negative effects of a large inheritance by:
- Using the inheritance to pay off existing debt, thereby decreasing the value of your reportable assets
- Contributing a sizeable portion of your inheritance to a retirement account
- Transferring the gift to another person such as grandparent, sibling, or another relative
- Investing in a qualified college savings plan or educational trust
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