Maximize Financial Aid Eligibility by Lowering the Expected Family Contributions

Below is a list of strategies to keep in mind when thinking of applying for college financial aid and how to maximize financial aid eligibility:

• Generally, parental assets (not including home equity in the primary residence) are assessed up to 5.6%. Student assets at this time are assessed at 35% as of the date FAFSA is completed. If there is doubt about the ownership of a particular asset, check with your financial or tax adviser.
• If you are planning to re-allocate assets before applying for student financial aid, know that the following assets are not included in the federal need analysis formulary: Personal residence Retirement plan assets Life Insurance Annuities Personal property ( cars. boats, etc)
• Assets and money in the student's name should be used first. It will reduce the amount of future student assets in the upcoming years. Since these assets are currently assessed at 35%, reducing these assets should be part of your strategy to maximize financial aid eligibility.

• If you have been saving money a large purchase or home improvement project, be sure to purchase this before you submit the FAFSA application. This will reduce the assets reported and improve your eligibility for scholarships, grants and loans.

• Keep an eye on your "base year" income. The "base year" is the calendar year prior to requesting aid. Example: Requesting aid for the 2008-2009 school year in the year 2007. Your "base year" would be 2007. If possible, reduce your adjusted gross income and net worth for your base year.

• You should also attempt to minimize capital gains in your base year, as capital gains are considered as income.

• Don't use retirement funds to pay for college. As mentioned above, they are not counted as assets. Use assets in savings accounts or other investment vehicles first, as this will reduce the amount of assets listed in the FAFSA. If you must use retirement funds, it is better to borrow from them and avoid withdrawal penalties.

• Invest in a 529 college saving plan owned by the parents, as this will be assessed at a lower value than one owned by the student. A 529 plan owned by a grandparent is not used in the federal needs analysis formulary.

• If you have more than one child in college, it will significantly reduce the parental contribution. For example, if the parental contribution is $6000, it will be $3000 per child if both are enrolled in college. Therefore, each child will have a greater financial need. If the children are only a year apart in school, the older child may want to consider waiting a year if this is an important consideration.

• Assets of other children in the family are not considered in the FAFSA needs analysis.

For a quick and easy way to calculate your expected family contribution (EFC),check out this easy to use EFC financial aid calculator

One last item to keep in mind: Some colleges use the College Scholarship Service (CSS) Profile form. This form asks for more comprehensive financial information. The thing to remember here is that some colleges will look at individual assets more closely than others when awarding their own student financial aid packets. Check with the college of your choice to see if they require the CSS/Profile form.