Does a Trust Fund Affect a Pell Grant?
If the student or a dependent student's parents are treated as owners or partial owners of a trust fund, it will probably affect the student's eligibility for need-based financial aid. In general, the student is less likely to get a Pell Grant than he would have been without the trust fund.
Other People Are Reading
-
Reporting on Student Aid Application
-
Anyone who receives the interest or principal from a trust fund or is eligible to do so in the future must list the trust fund as an asset on the Free Application for Federal Student Aid (FAFSA). In general, the value of the trust fund is its net present value for the beneficiary, which you can estimate using the calculator on the FinAid website. The only types of trust funds that do not need to be reported on the FAFSA are those established or restricted by a court order and those that are involved in a legal dispute over ownership.
Effects on Expected Family Contribution
-
The federal government's financial aid formulas calculate the estimated family contribution (EFC) based on the information on the FAFSA. The formula includes 20 percent of any asset listed as belonging to the student, including a trust fund, in the student's EFC. If the trust fund is a parent's asset, the formula will only include 2.6 percent to 5.6 percent of its value in the student's EFC, depending on the total value of the parents' assets.
-
Effects on Pell Grant
-
The amount of a Pell Grant that the student qualifies for depends mostly on the student's EFC. For the 2011 to 2012 school year, students with an EFC of $5,273 or less might qualify to receive a Pell Grant. The lower the student's EFC, the larger the Pell Grant can be. The sum of the Pell Grant and the EFC can never exceed the student's expected cost of attendance for the year, as determined by the school. When a trust fund increases the amount of a student's EFC, this will directly decrease the amount of the Pell Grant the student receives, sometimes wiping out the student's Pell eligibility entirely.
Considerations
-
If the trust fund is a parent's asset, it affects the calculations much less than if it is a student's asset. Parents should encourage grandparents and others who plan to leave a trust fund as an inheritance to list the parents as the owners, not the student. In addition, parents with an adjusted gross income of less than $50,000 who are eligible to file Form 1040A or 1040EZ qualify for the simplified needs test, which excludes all parental assets from financial aid calculations. Parents with an income near the threshold should try to qualify for the simplified needs test so the trust fund won't affect the financial aid award.
-
