My nephew is having his wages garnished by a credit card company for a past due account. Are they allowed to do that? Bonnie, New Hampshire
Generally, if your nephew has a job and the creditor has sued, won in court and received a judgment, they may be able to grab up to 25 percent of your nephew’s wages until that judgment is satisfied.
The process, permitted in nearly every state, is called a “wage garnishment.” To garnish his wages, your nephew’s pay must be above the poverty line, no other garnishments must be in effect (unless the garnishment is for child or spousal support), and he must not have filed for bankruptcy.
I have been told that if I have any “extra” money at the time my child is applying for college financial aid, I should withdraw the amount in cash and hide it.
For example, if my Contingency Fund has a balance of $10,000 and my Freedom Account has $9,500, it will look like I have $20,000 at my disposal for college.
My friend says it would be better to get a safe deposit box and put the $20,000 in there in cash. She also says that if it is on our bank statement, then it will count against us as far as financial aid. What do you say? Sandy, Colorado
I’m sure your friend means well, but if you follow this advice you might find yourself looking out at the world from behind bars.
Hiding assets on a Financial Aid form constitutes fraud and is punishable by a $20,000 fine (bye-bye CF and FA), up to 19 months in federal prison or both. There’s a fine line between maximizing eligibility for college financial aid by sheltering assets, and hiding assets in order to qualify. One is legal, the other is not.
The children of people making $150,000 a year may qualify for financial aid while the kids of people making $50,000 may not. It all depends on how the rest of the parents’ finances shake out and whether the school uses the popular “federal methodology” to determine financial aid (where home equity doesn’t count) or the “institutional methodology” used by more elite schools, where it does.
College saving and asset planning has become very complicated. I suggest you do a lot of research, which can easily be done on the web. A site like www.FinAid.org and its sister site www.FastWeb.com, offer information on financial planning for college, and scholarship research, tips and searches.
With the change in the economy and tightening of the credit industry, private loans are harder to get. But that’s not necessarily a bad thing. As I’m sure you’ve read, parents and graduates alike are feeling the burden of too much student loan debt. Figuring out creative solutions for paying for college might seem like a drag now, but you’ll be so thankful four years from now.
Question: Have you applied for college financial aid—either for you or your child? If so, what websites or resources would you recommend for others going through this? Tell us here.