Fiction: College savings prevent students from qualifying for financial aid.
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Fact: Savings will not necessarily disqualify a student for financial aid. The formula used on the Free Application for Federal Student Aid (FAFSA) is primarily income-driven; while assets are taken into consideration, their impact on the parent contribution is relatively small. In fact, per the FAFSA formula, only 5.6 percent of parental assets (after an asset protection amount is taken into account) are considered available for college expenses, as compared with 20 percent of the childís assets. In general, a family with savings has more options when it comes to paying for college; families who havenít saved may find themselves borrowing in order to pay all or part of their expected contribution. Repaying student loans with interest may not make as much financial sense as using savings to pay for college.
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