With the high cost of college today, it is imperative that all prospective students and their parents educate themselves on the programs available to help reduce tuition cost. Extra planning is particularly needed by parents of children receiving a financial settlement due to injury and who are approaching college age.
Preparing For College With A Settlement in the Mix
If the decision is made to take a lump sum settlement when an injured minor turns 18, the student must declare the entire settlement payout when filling out the Free Application for Federal Student Aid forms (FAFSA), which schools use to determine financial aid eligibility. If the amount is significant, it would be unlikely the student would qualify for financial support. Families can elect to spread out settlement payments (i.e., on the student’s 18, 19, 20 and 21 birthdays). This can greatly enhance the possibility of qualifying for more financial aid than receiving the funds in one lump sum. However, any portion of the settlement that is remaining in the settlement account must also be reported.
Delaying Receipt of Settlement Payments
Another option may prove to be the smartest strategy. It could be prudent for parents to defer the first payment of a structured settlement until after the student’s expected graduation. By not having to declare the settlement funds during the child’s college years, the chances for financial aid go up. In addition, the settlement funds are allowed to grow within the structure for a longer period. Payment taken after graduation can then be used to pay off any student loans. Insisting on addressing college finances during an injured child’s settlement negotiations may seem an unusual request, but by doing so, parents can make sure they have the financial ability to provide a solid education for their child.