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FAFSA tricks

idamayeridamayer Posts: 1,313Registered User Senior Member
Okay, so:
how does FAFSA measure your ability to pay for college, what is included and what is not?
Do they look differently at checking and savings accounts, and what about stocks? Does it matter whose name the money is under (mine or my parents')?
I've heard that they don't take debt into account? If this is the case, that is a problem...
Basically, any sorts of ways to move money around so that I get a lower EFC...?
Post edited by idamayer on
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Replies to: FAFSA tricks

  • lindalanalindalana Posts: 352Registered User Member
    you can find google/ EFC calculator and play with your numbers, see what is your best strategy.
  • IrbisIrbis Posts: 259Registered User Junior Member
    Basically, any sorts of ways to move money around so that I get a lower EFC...?
    Nope, FAFSA is pretty straight-forward.
  • dt123dt123 Posts: 1,178Registered User Senior Member
    Basically, any sorts of ways to move money around so that I get a lower EFC...?

    Sure there is. You can give your money away prior to filing. United Way, Salvation Army, etc.

    You can adjust your work and investments so you don't make so much in the year prior to filing and for the next N years until all your kids graduate. There is nothing about the FAFSA that says you have to earn money up to your full potential. Give your time away. FAFSA can't grab the value of volunteering.
  • idamayeridamayer Posts: 1,313Registered User Senior Member
    what about the debts thing? Does the FAFSA calculate debts?
  • ShadowOfAnEnigmaShadowOfAnEnigma Posts: 922Registered User Member
    No, debts are not factored in.
  • sblake7sblake7 Posts: 1,691Registered User Senior Member
    There's a lot you can do, given a little time, to keep your EFC as low as possible, and your potential aid offers as high as possible. Legally and ethically. Sitting back and doing nothing, and not educating yourself, can be a recipe for disaster, and you'll be posting one of the 'woe is me' threads when you get offered zero aid.

    My top suggestions:

    1. If you have any hope of getting need-based aid, don't put savings (or other liquid assets) in the student's name. Save in the parent's name. If it's already in the studen't name, spend it down before you file FAFSA. Assets in the student's name is a killer in terms of FA.

    2. Keep student income under $2,600 (work-study excepted). Below that income doesn't get assessed. Above that, it does.

    3. Pay down debt in order to reduce liquid assets (checking, savings, CD's, stocks, etc.) on the date of filing.

    4. If you're considering any major purchases, accelerate them to before the FAFSA filing date, in order to reduce liquid assets. This is particularly important for student assets. Considering buying a car? A laptop for college? $20,000 sitting in a student's savings account can reduce financial aid by $7,000 a year. Convert that $20K into a car the day before you file FAFSA, and potentially increase your aid by $7K. Wait until the day after, and you're out of luck.

    5. If either parent is considering going back to school, doing it while one of the kids is going to college can reduce your student's Expected Family Contribution by half.

    6. Max out contributions to retirement funds in the years prior to the base income year (the calendar year before the freshman college year), in order to reduce assets in the subsequent year(s).

    7. If grandma or grandpa want to help with college, ask them to wait until January of the student's senior year of college, when they can gift him/her to help pay off the student loans. Gifting prior to that will ensure a reduction of aid.

    8. If either parent is self employed, reinvest business income back into the business in the college years, in order to reduce net income. Time to buy that equipment for the business you've been considering.

    9. If a family has substantial liquid assets, and income around 50K, see if you can defer/reduce income to get it under 50K, in order to qualify for the simplified needs test, in which no parental assets get counted.

    10. As the FAFSA filing date approaches, use the calculator at FinAid frequently to run hypotneticals with various asset and income numbers. The results will tell you your EFC to the dollar, and also tell you which component (parental assets, parental income, student assets, student income) is driving up your EFC.

    11. Buy a book that explains all of the above in greater detail. I liked Princeton Review's "Paying for College Without Going Broke". Read it a couple times months before you'll be filling out the forms, while you still have time to develop strategies to increase your aid.

    12. If you're house rich, and cash poor, you'll probably do best with the colleges that only look at FAFSA. If you're also considering some private's that require the Profile, take note of which ones cap house value at 2.4 times parental income (and then subtract mortgage debt from that to calculate equity). With these schools, you can be living in a million dollar home, with tons of equity, and still have little or no home equity assessed in the financial aid formula. Devil's in the details, YMMV.

    Good luck-
  • thumper1thumper1 Posts: 35,084Registered User Senior Member
    sblake makes excellent suggestions. However, I would make one caution. Spending down, and reducing assets, and moving assets around assumes you HAVE those assets to work with. I know more than one family who "spent down" a considerable amount of savings and did NOT receive very significant need based aid. The family thought they would reduce their "assets" when really what they did was reduce the money they WOULD HAVE had available to pay some of the college costs. Be careful.
  • xiggixiggi Posts: 22,241Registered User Senior Member
    "5. If either parent is considering going back to school, doing it while one of the kids is going to college can reduce your student's Expected Family Contribution by half."

    I believe that this loophole has been closed for a few years.
  • hsmomstefhsmomstef Posts: 3,579Registered User Senior Member
    #5 -- xiggi is correct. This loophole has been closed. The student's EFC will not be lowered by having a parent attend college, however -- the parents EFC is lowered.

    Your EFC (Expected Family contribution) is divided amoung the following people in the family if all are going to college: Self, spouse and children.

    So -- it can lower the parents, but the students will still be at the original amount and will not be divided.
  • sybbie719sybbie719 Posts: 16,663Super Moderator Senior Member
    Parent who is also a student checking in.

    hsmomstef is correct. My being in school does nothing for the child's efc, but the 2 of us being in school lowered mine by a little more than half.


    Max out contributions to retirement funds in the years prior to the base income year (the calendar year before the freshman college year), in order to reduce assets in the subsequent year(s).

    at schools that give need based aid and use the profile or their own institutional aid form:

    Keep in mind that the amount of $$ you contribute to your 401K is added back in as income in calculating your EFC. The money in your 401K is not counted as an asset.

    So if you make 100,000 and max out as 18% once it goes in the 401k the 18K is not counted as an asset but the 18,000 that you put in is still counted as income during the years that you file.
  • sblake7sblake7 Posts: 1,691Registered User Senior Member
    Thumper1 is correct-- it doesn't make sense to spend down assets if your liquid assets are already below your asset protection allowance. Make sure you know what it is-- it depends on number of parents, age of older parent, and number of children in the family. The FinAid calculator will tell you this.

    xiggi and hsmomstef are correct-- the formula no longer automatically reduces the student's EFC by half when a parent is enrolled in college at the same time as the student. Financial Aid officers are able to use professional judgement to make an allowance under these circumstances, however, so there still might be some advantage to this strategy.

    And sybbie is correct as well-- funding your retirement account doesn't help in terms of reducing income in the reporting year; that's why it makes sense to contribute fully in the years prior to the base income year in order to reduce assets during the college years.
  • MickeyDMickeyD Posts: 58Registered User Junior Member
    1. IF your folks have any assets, do not apply to elite "financial need based aid only" schools unless they use FAFSA and NOT CSS.
    2. The schools that use CSS will ask your parents to take a 2nd mortgage, borrow from life insurance, retirement accounts or anything else they can get your parents to put their hands on just to get their $, which they give to other students.
    3. If they use CSS, you should limit your apps to merit aid schools. Financial need based aid is someone's communist idea of income redistribution disguised as an educational program.
    4. Take a crack a projecting the 4 year cost. Many of the CSS schools won't be happy that you have done your homework.
    5. sblake7's advice is excellent and less opinionated than mine.
  • sblake7sblake7 Posts: 1,691Registered User Senior Member
    I should probably add-- if you're a high income family, showing an AGI of over around 150K (median household income is under 50K), and just one child currently headed to college, there probably isn't much you can do to get your EFC below the Cost of Attendance for most colleges-- which translates to no need-based aid. Your AGI alone is enough to drive your EFC into the 40K+ range. Under those circumstances, with only one child in college at a time, the best strategy is to work on merit-based aid and scholarships. Shuffling assets and working around the margins on income won't have much net effect.
  • calmomcalmom Posts: 16,309Registered User Senior Member
    Most of what MickeyD says is wrong.

    The FAFSA-only schools generally are not schools that promise to meet full need. They may base need on a lower EFC, but they also may leave a large gap of unmet need.

    The prestige, elite schools tend to be well-endowed and can be very generous with financial aid, even though they recalculate family contribution. Many private colleges also favorably package need-based aid with small to moderate merit awards that end up being fairly generous. It is not uncommon for such schools to provide a merit award in addition to the need-based grant, using the merit award to eliminate or reduce loans or work study, or increasing grant total overall.

    Some additional notes re Sblake's comments:

    If you are concerned about home equity, it's best to contact the college directly to ask how its calculated, rather than rely on generalized information, such as the listings of schools who belong to the 568 group. For example, my daughter's college caps home valuation at the minimum derived value of the federal housing index (calculator available at finaid.org).

    Also, colleges that take the CSS Profile or which use their own forms in addition to the FAFSA will ask for tax returns and a business/farm supplement for self-employed individuals. They will often add back certain deductions, such as write offs for depreciation or a home office, or expenses related to vehicles. Some colleges also have a policy as to the amount of business deductions they will allow as an overall percentage of gross receipts; colleges also ask for a valuation of the business overall as an asset, and in some cases will substitute their own judgment for figures provided by the parent. So investing money back into the business is not always such a good idea, because purchases become business assets and colleges might not allow deductions (such as section 179 writeoffs) to the same extent that IRS does. It's pretty much analogous to other issues related to spending down assets and paying into retirement funds -- at a certain level it makes sense, beyond that it can backfire.
  • MickeyDMickeyD Posts: 58Registered User Junior Member
    Calmom,

    I am speaking from my experience from THIS YEAR. A very elite student applying to 6 very elite schools all with large endowments. The administration of financial aid is so different at every institution that it really doesn't matter if they use FAFSA, CSS or some other random arbitrary means to determine what they determine they want you to pay. Sorry, but the whole system is a mess. Need based financial aid will wreck many great colleges if they don't wake up and straighten this mess out!
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