On the lookout

[tzikeh]

Someone was talking to me recently about getting financial aid for grad school and they said something about rolling over their retirement fund to their parents so it was no longer in their name. If that was you, can you drop me a comment?

Comments

[darthfox.livejournal.com]

[wave] hi!

[bkwyrm.livejournal.com]

Responding late - this isn't really considered a good idea, legally. If you're going to grad school, the gov't funding isn't really need based. YOu can get funding regardless of need. If you roll over your 401K, though, the gov't can see that as evidence that you're trying to hide money and that can really get you in trouble.

hmmm

[tzikeh.livejournal.com]

But I have heard over and over that they look at your assets and say "But you could cash out / borrow against / whatever your 401k and that would pay for grad school, so we don't have to give you any money."

Is this not true?

Re: hmmm

[bkwyrm.livejournal.com]

Well, sort of. This is from the mouth of a tax geek....he says that you pay a 10% penalty when you turn the 401K over to someone else, just like you would if you cashed it out, but that there's procedures in place where, if you use the 401K to pay for education, there's no penalty. So it might make more sense to look into getting the money out, because you're going to pay a penalty and not have the money if you roll it over to someone else.
When they're discussing "not funding" you, they're talking about need-based assistance, or subsidized loans. Every graduate student is entitled to unsubsidized loans, so you'd get the money, it's just a matter of how much interest you pay.
Just because I'm wondering, what school are you thinking of attending? Have you filled out a FAFSA?
(I used to be a financial aid counselor for a grad school, The Husband is a tax lawyer.)