I have a fairly modest income (closer to the poverty line than median income), but because we live abroad, we're able to live comfortably and save responsibly. We max out our IRA contributions every year, and, sometimes because we can save extra, and sometimes because of gifts from family, we're able to have other investments as well (i.e., outside of retirement accounts).

We're not so well off, however, that we have any hope of paying for college for our three children, who are now elementary-aged: we'll have to depend on financial aid. (I suppose that all of our savings at that point might pay for college for one of them; or one-and-a-half.)

My concern is that by saving and investing now, I'm harming my (kids') chance for financial aid in the future. Will I just report these things on the FAFSA and have the government say, in effect, “Well, it looks like you can afford to pay for their college”.

So, is it counterproductive at this stage to save money outside of retirement accounts? Or, are there specific types of investments we can make that won't count against college financial aid?

  • What kind of financial aid? Today, most "financial aid" consists of loans. Methinks it better for you to be ineligible for "financial aid" and be able to pay enough that they can cover the difference with their own sweat (their own income) rather than deliberately spending the money and forcing them to take out "low interest" student loans to pay part of the bill. Have you played with FAFSA to see what happens?
    – Michael
    Sep 1, 2017 at 5:32
  • 1
    Yes, savings will count against financial aid; but no, it is not counterproductive to save. To a first approximation, the FAFSA "expected contribution" towards annual college expenses is 5% of your non-residence non-retirement savings. Sep 1, 2017 at 15:32

2 Answers 2


I would go here and play with the FASFA financial aid calculator to see if you qualify for grants, which is probably your ultimate objective. It would seem to me that qualified retirement contributions do not count towards eligibility provided you are younger than 59.5, and even then it would be questionable.

  • What would be questionable? Link is great and will help OP, I just don't understand that line. Sep 5, 2017 at 12:39

Or, are there specific types of investments we can make that won't count against college financial aid?

Yes - Start saving for college. You seem to be very willing to save for your own retirement and other investments but are willing to let your kids suffer through college loans and subsidies for college.

Invest in your children's education.

  • My children's education is definitely my priority. But there are financial resources available to pay for college, and I want to be able to avail myself of those fully. I can't apply for a Pell grant to retire. :-)
    – adam.baker
    Sep 1, 2017 at 14:58
  • My point is - you are trying to finagle assets to be eligible for more need-based aid. If you truly qualify for need-based aid then by all means use it, but hiding assets to get subsidies is disingenuous in my mind. Maybe I'm being over-critical, though - I certainly mean no offense.
    – D Stanley
    Sep 1, 2017 at 15:05
  • No, it's a fair comment (I'm a fiscal conservative myself). When these subsidies are made available, though, you've got to think about how you can reap the benefit. “Hiding” might not be the right word; I gather the house you live in doesn't count against you, which is not really a hidden asset. :-)
    – adam.baker
    Sep 2, 2017 at 3:15

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