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"Hiding" Assets from Financial Aid Officers

Written by Sally Rubenstone | March 16, 2011

Question: We are not a wealthy family and should ordinarily qualify for a lot of need-based financial aid, but we recently came into an inheritance of over $200,000. This is a one-time thing and, although we’re very grateful for the extra money, we’re afraid that it could have a huge impact on our son’s college financial aid, if we put this money into a bank account where it is considered an asset in financial aid formulas. (He is in 10th grade right now and planning to apply to some of the top colleges that have excellent need-based financial aid policies.) A casual acquaintance has suggested to us that we “hide” this money by investing in something like an antique car, jewelry, fine art, even a Steinway piano. While these ‘investments” won’t be liquid and do carry some risk, it seems that—if chosen wisely—we could sell such items for a profit (or at least recoup our expenditure) once our son has finished college, and he could hopefully land a big grant to attend one of his first-choice colleges.

Is this a strategy that we can use to avoid losing out on financial aid due to our windfall? And if it is, why don’t more families try this (or maybe they do)?

Your “casual acquaintance’ is correct. It would be possible to hide your new-found fortune from the prying eyes of financial aid officials, if you use it for the purchases you’ve named above or for any big-ticket item besides real estate.

So why don’t more folks take this approach?

For many, there’s the risk factor. For instance, even if classic Corvettes are a hot commodity right now, can you count on unloading yours in six years when your son is out of school and you need the dough? Ditto Picasso prints, grand pianos, and diamond tiaras. (But, personally, I’d go for the car … preferably a red ’58 convertible :) ). Thus many families opt to stash their cash where it is more liquid and where the return on their investment is more predictable. Moreover, if your son’s financial aid ends up being insufficient for all the costs you need to cover, you may need to take out a loan since your disposable cash will be .., well ... indisposed (And if you make the sale before your son finishes college, you’ll need to report the income to the IRS, so it will show up on financial aid forms, too.)

In addition, if a family already qualifies for little or no need-based financial aid, then having this “extra’ money won’t affect their scholarship odds. (This sounds like it's not true in your case, but it probably keeps some people from trying this tack.)

Finally, there’s the Karma consideration. Many parents would contend that money that falls from the sky right about when Junior is heading off to college was probably intended to be used for college. By putting your $200K in your son’s college fund and forgoing some of the grants for which he might otherwise be eligible, you would be freeing up financial-aid dollars for another child who wasn’t so fortunate.

Anyway, good luck with your decision, and drive that 'Vette carefully (but don’t wear the tiara when the top's down). ;-)

(posted 3/16/2011)

Sally Rubenstone

Sally Rubenstone knows the competitive and often convoluted college admission process inside out: From the first time the topic of college comes up at the dinner table until the last duffel bag is unloaded on a dorm room floor. She is the co-author of Panicked Parents' Guide to College Admissions; The Transfer Student's Guide to Changing Colleges and The International Student's Guide to Going to College in America. Sally has appeared on NBC's Today program and has been quoted in countless publications, including The New York Times, The Washington Post, USA Weekend, USA Today, U.S. News & World Report, Newsweek, People and Seventeen. Sally has viewed the admissions world from many angles: As a Smith College admission counselor for 15 years, an independent college counselor serving students from a wide range of backgrounds and the author of College Confidential's "Ask the Dean" column. She also taught language arts, social studies, study skills and test preparation in 10 schools, including American international schools in London, Paris, Geneva, Athens and Tel Aviv. As senior advisor to College Confidential since 2002, Sally has helped hundreds of students and parents navigate the college admissions maze. In 2008, she co-founded College Karma, a private college consulting firm, with her College Confidential colleague Dave Berry, and she continues to serve as a College Confidential advisor. Sally and her husband, Chris Petrides, became first-time parents in 1997 at the ripe-old age of 45. So Sally was nearly an official senior citizen when her son Jack began the college selection process, and when she was finally able to practice what she had preached for more than three decades.