31 January 2010
Posted in
High School -
High School Info
Financial Aid Tips as you Prepare for College Expenses
The four basic principles for maximizing eligibility are: 
1. Reducing income during the year(s) upon which the financial aid need analysis is based. (This can be a tricky choice, because the natural assumption is that you need more income, not less, during college years. However, there are cases in which this makes sense.
For example, if a parent decides to take a sabbatical from work or accept a severance package from an employer, moving the unemployment period to the year upon which the income is based can result in a large aid package.)
2. Reducing "included" assets. There are two types of assets, those that are included in the need analysis formula and those that are not. Converting included assets into non-included assets will increase eligibility by sheltering them from the need-analysis process. However, most financial planners recommend that parents maintain a contingency fund equal to six months' salary in relatively liquid form for emergencies and other unforeseeable circumstances.
3. Increasing the number of children enrolled in college and pursuing a degree or certificate at the same time. The parent contribution is split among all children who will be simultaneously enrolled in college.
4. Taking advantage of the differences in the way the need analysis process assesses the assets and income of the student and his or her parents.
With the above principles in mind, here are the top ten tactics:
Top Ten Tactics to Maximize Eligibility
1. Save money in the parent's name, not the child's name.
2. Pay off consumer debt, such as credit card and auto loan balances (and resist the temptation to run up a new balance).
3. Spend down the student's assets first, before touching the parents' money-it's counted at a higher rate when calculating the EFC.
4. Accelerate necessary expenses to reduce available cash. For example, if you need a car or computer, buy it before you file the FASFA. If the parents intend too give their student a computer or car as a graduation present, they should buy it before they file the FAFSA, using the student's money.
5. Minimize capital gains.
6. Maximize contributions to your retirement fund. (Note: The current year's contributions get added back in as untaxed income on the worksheets, but are not counted as assets)
7. Do not withdraw money from your retirement fund to pay for school, as distributions count as taxable income, reducing next year's financial aid eligibility. If you must use money from your retirement funds, borrow the money from the retirement fund instead of getting a distribution.
8. Prepay your mortgage.
9. Use section 529 College Savings Plans, Prepaid Tuition Plans or Coverdell Education Savings accounts. A plan owned by a parent has minimal impact on financial aid, and one owned by a grandparent has no impact at all.
10. Choose the date to submit the FAFSA carefully, as assets and marital status are specified as of the application date. Applicant marital status cannot be updated.
Kimberly Simpson
Collegiate Admissions Consulting Services, LLC
www.collegiateadmissions.com
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
34 Riverdale Drive
Covington, LA 70433
985.893.9260
504.450.9976 mobile
985.893.4404 fax
Member of:
National Association of College Admission Counseling (NACAC)
Southern Association of College Admission Counseling (SACAC)
Independent Educational Consultants Association (IECA)
Higher Educational Consultants Association (HECA)
Louisiana Counseling Association (LCA)
Louisiana College Counseling Association (LCCA)
Louisiana Career Development Association (LCDA)
Louisiana School Counseling Association (LSCA)
Louisiana Department of Education High School Redesign Task Force
The Princeton Review National College Counseling Advisory Board
| Next > |
|---|