The ethics of positioning yourself for the best possible financial aid

There’s a discussion in the FA forum right now that’s relevant. A single mom remarried.

Apparently, since she hasn’t filed FAFSA yet, she has to include her new husband’s income and assets on FAFSA for her kid to go to college this fall, even though the income/assets are from 2015 (prior prior year from now on) and they just got married in November. One might have counseled her to file FAFSA BEFORE she get married for this year (since it opened around Sept), so for this year at least, his income wouldn’t be included.

Or, consider the notion of paying all your big bills, paying off a credit card or car, before filing FAFSA, since credit card/auto debt isn’t a factor in FA but money in the bank is.

Is it unethical to do do these things?

@OHMomof2 the fafsa and Profile were both available for submission on October 1.

Yes…it’s fine to pay your bills before you submit your FAFSA.

But to paraphrase another poster…don’t do things for financial aid gain that you were NOT planning on doing…anyway.

I happen to agree with that opinion.

There was one poster whose family earned $600k/year and wanted to use deferred compensation to qualify for need-based financial aid. Putting aside whether a particular strategy would work, I view that as abusing the system, and taking away need-based aid from those who truly need it. If someone disagrees with that, I’m not going to be able to add anything that would change their mind.

“Or, consider the notion of paying all your big bills, paying off a credit card or car, before filing FAFSA, since credit card/auto debt isn’t a factor in FA but money in the bank is.”

As I understand it, and please correct me if I’m wrong, but isn’t a very small percentage of “money in the bank” considered as “available for parental financial contributions towards college costs” compared to a much larger percentage of actual income? Something like 5% of money in the bank? Because that is my understanding, we have chosen NOT to make major purchases like buying a much needed new car because we probably will need the money for college costs. I mean if 90% of your savings were counted in your EFC that would be a different story, but as I understand it, it’s not, so what good does it do to reduce your cash savings?

When doing the FAFSA and CSS this year, I wondered why this was the case, but I just figured it was easier for colleges to determine a family’s actual income from tax records rather than attempt to analyze and track assets and savings - I’m sure there are many ways to “hide” assets - not that that’s ethical, but that’s just reality.

^ Correct. Which is why all this financial gymnastics is worthless for the vast majority of people anyway.

Almost always, the people who can do the shifting around of assets aren’t going to be low enough to be in Pell territory anyway and then personally, I don’t care (generally) how universities spend their own institutional funds.

But some of the things that are mentioned on here (here being CC not necessarily this thread) are straight up illegal and that’s a whole 'nother barrel of fish.

And you (parents) also get an asset allowance based on parental age, so the first $15-25k of assets isn’t counted.

Student assets are assessed at 20%, so that’s a bigger consideration.

Yes. Which is also why the “those of us who saved for college are penalized” argument is also mostly bs.

As twoin said though, if it’s the student’s money, it matters somewhat more.

In response to the OP it’s really hard to make such generalized judgements about it. Some parents will move around their finances in such ways that their kids maximize their financial aid, but then perhaps the parents are stingy and wouldn’t be paying anyways. That’s sort-of my situation (and my brother’s).

My parents moved a lot of their money to their business checking/savings accounts because the CSS didn’t seem to ask anything about them. At the end of the day, I don’t get need-based aid as a transfer student, but I imagine as a freshman applicant it would make a difference.