Other Financial Considerations
If you plan ahead, you can save money to pay for school. You can save money in any standard savings or investment account, or in a special account for educational expenses called a 529 College Savings Plan.
529 plans let you or your parents save money without paying taxes on the interest, which means that your money will grow more quickly than in a standard bank or investment account. The College Savings Plans Network has a lot more information about 529 plans.
The disadvantages of a 529 plan are that you have to use the money saved in it for educational expenses, and if the plan owner (usually the student’s parent or grandparent) gets Supplemental Security Income (SSI), the money in the 529 plan will count against the SSI resource limit.
Note: You may be able to work around these disadvantages if you rollover money from a 529 account into an ABLE account. Or, you could just open up an ABLE account instead of a 529. Learn more about ABLE accounts on DB101.
Regardless of the type of account you choose, you and your family should try to save some money each month for your education expenses. By learning to save now, you will be practicing a habit you will need for the rest of your life.
When you apply for financial aid, savings and other investments like 529 plans are all counted by the federal government and financial aid offices. They look at how much you and your family have in assets and then decide how much you can use to pay for college.
It’s important to understand that they evaluate your savings differently than your parents’ savings. If you save money in your own account, they will figure that you should spend about 35% of your savings on college expenses each year. They only expect your parents to spend about 5% of their savings on college expenses. So if you and your family save money in your parents’ accounts instead of your own, you will probably receive more financial aid from your college.
Impact on Benefits
Different types of financial aid — especially grants and scholarships — can impact disability benefits like SSI. They may increase your countable income or put your assets over the assets limit, causing your benefits to be reduced or eliminated. To learn more about what you can do in this situation,talk to a Work Incentive Consultant.
If you are in school, under age 22, on SSI, and working part-time, the Student Earned Income Exclusion (SEIE) can help you. The SEIE lets you earn up to $2,290 per month (with a limit of $9,230 per year) without having those wages counted as income by SSI. So if you get a part-time job and don’t exceed those limits, your SSI benefit won’t decrease at all.
You can read more about the SEIE on the DB101 page about SSI and Work. You should also talk to a Work Incentive Consultant.
Saving if You’re on SSI
If you’re on SSI and save too much money, you’ll go over the asset limit and lose your benefit.
There are ways to save money for school without jeopardizing your SSI though:
- A Plan to Achieve Self-Support (PASS) lets you set aside income in a separate account to help you reach a career goal, including getting a higher education. Money saved in a PASS account will not be counted by SSI. To learn more, read DB101’s PASS section or contact a PASS Cadre.
- Individual Development Accounts (IDAs) are similar to PASS plans, but have the added benefit that financial institutions will actually match your own contributions to your IDA. Not all IDAs let you go over the SSI asset limit though, so research them carefully before you set one up. Read the DB101 page on IDAs to learn more or talk to a Work Incentive Consultant.
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A Work Incentive Consultant is a trained expert who can help you understand Social Security work incentives, disability benefit programs, and how they are impacted by work. Their goal is to help you transition to work and make a sustainable financial plan for your future.
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