The amount of financial aid a college student is eligible to receive is based on the data the student or his family provides in the Free Application for Federal Student Aid (FAFSA). Both income and assets play a role in the amount the family is expected to contribute. A savings account does count as an asset, but the effect depends on the type of savings account and who is listed as the owner.
Type of Savings
The type of savings account you have will affect the amount of money you are expected to pay for college. A traditional savings account or money in a brokerage account will decrease the amount of financial aid you are eligible for the most. Education-specific savings accounts like a 529 plan or an educational savings account (ESA) will have a smaller effect. Retirement savings accounts, however, have no effect on the FAFSA.
Effect of a Savings Account
If the student has assets in a traditional savings account, his expected contribution will increase by 20 percent of those assets. For example, if the expected contribution was $5,000 without a savings account, it would increase to $7,000 if he had $10,000 in a savings account. Money in a 529 account, on the other hand, will only increase the amount the family is expected to pay by 5.64 percent of the amount in the savings account. Thus, in the example above, if the $10,000 was in a 529 plan rather than a savings account, the expected contribution would be $5,564.
Reducing Your Savings
If you've earmarked the money in your savings account for certain non-college related expenses, it's smart to make those purchases before you file the FAFSA. For example, if you've been saving for a car to get you back home for the weekends, buy it sooner rather than later. Using the money in your savings account to reduce other consumer debt that you have, such as credit card debt, before filing the FAFSA means it won't be available to be considered as part of your expected contribution.
Parent vs. Student Name
FinAid -- a website that calls itself "the smart student guide to financial aid" -- states that assets in the student's name have a bigger impact on financial aid than those in the parents' names, since the needs analysis usually shelters up to $50,000 of a parent's assets, while it expects the student to spend her money on her education. If possible, move assets from accounts in the student's name to custodial accounts like a 529 plan before filing the FAFSA.