Maximizing Student Aid Eligibility

Many families seek strategies to maximize their eligibility for need-based financial aid.   Based on current Federal Need Analysis Calculation Methodology, these frequently discussed tactics may increase student aid eligibility by decreasing the EFC or Expected Family Contribution.  

Federal regulations regarding financial aid can change at any time, and there is no guarantee that any of these strategies will be viable now, or in the future.

Keep in mind that "base year" refers to the tax year prior to the "award year".  The award year is the academic year for which aid is requested, even when the student does not enroll in college until August or September of the award year.   The FAFSA needs analysis formula uses financial information from the base year to estimate expected family contribution.

Many of the strategies listed below are tactics to minimize income during the base year(s) and included assets when the FAFSA is filed.

1. Reduce base year income.
2. Pay off credit card debt and other consumer debt and auto loans
3. Save money in the parent's name, not the children's names.  Or use a savings plan that is treated like a parental asset, such as a 529 college savings plan, a prepaid tuition plan, or other eligible education savings vehicle.
4. Maximize the number of family members attending college simultaneously.
5. Use the student's (child's) assets and income first to pay expenses.
6. Reduce cash by paying expenses (and making needed purchases - automobile, computer, furniture, home repairs) prior to filing the FAFSA.
7. Pay off or pay down home mortgage.
8. Minimize capital gains (base year, prior year and years during which student is enrolled in college and applying for aid)
9. Maximize retirement fund contributions (especially in years prior to completing FAFSA)
10. If parents need to use retirement fund money to fund education, borrow the money instead of taking a distribution.
11. If a family members (e.g. grandparents) desire to help fund education, ask them to consider holding off until the student graduates, or talk to their advisor about a 529 college savings plan owned by a non-parent family member. 
12. When viable, consider changing student's status from dependent to independent.
13. Carefully select the date to submit the FAFSA such that assets are minimized.
14. Avoid over-estimating income when filing FAFSA, and when possible pay taxes early in order to utilize the correct income amount.

These helpful books provide strategies for maximizing eligibility for financial aid and for completing the FAFSA. 

• Paying for College Without Going Broke, 2010 Edition (College Admissions Guides)
• Pay for College Without Sacrificing Your Retirement: A Guide to Your Financial Future
• Getting Financial Aid 2010 (College Board Guide to Getting Financial Aid)