Tips to Increase Your Aid

by: Raymond Tobaygo—Consultant Analyst, Devon White Inc.

1. Make sure your parents are saving money in their names, not yours. Unless you are certain you will not be eligible for any financial aid, the tax breaks your parents will get from having assets in your name are not worth it. The federal need analysis formula assumes that you will be able to contribute a greater percentage of your assets to your college fund. In your parents’ names, less will be expected to pay solely for your education. However, if you have assets in your name now, you cannot just transfer amounts to your parents—consult a financial advisor for advice. 

2. Pay off any family consumer debt. Your parents will be better off eliminating all credit card debt even if they have to take out a home equity loan to do so. The high interest rates, combined with the fact that this debt is not counted as the debit it really is to your family income, makes it a liability. In addition, paying it off will lower your family’s available cash, pushing up your need-eligibility for financial aid. 

3. Make necessary expenses, such as a new car or computer, before you file the FAFSA. This will reduce your family’s available cash, making less available to pay for college and a higher need for more loans and work-study. Also, spend the money and assets in your name first. Because of the same reason listed in #1, it will save your family more money in the end. 

4. Reduce capital gains. Tell your parents to do their stock and bond selling before you are a junior in high school (the year your aid is based on). When sold, these register as income, telling the government you have more money for school. If you are beyond your sophomore year, tell your parents to hold off selling until April of your junior year in college so you will still be eligible for the same amount of aid each year you are in college.

5. Ask your parents to store money in their retirement fund. Good news: Money in a retirement fund is not counted as income your family could contribute toward your college expenses. If you need money, have your parents borrow from their 401(k) plan first before tapping into their retirement cash. 

6. If grandparents, aunts, uncles, etc. want to give you money, ask them to wait until you graduate college. The money will be well appreciated when loans are due. If they cannot wait, tell them to give it to your parents. Alternatively, inquire at your college about a plan for depositing money directly without it affecting your income, and therefore, financial aid package, for the next year. 

7. Ask your parents NOT to give you a trust fund. A trust fund counts as part of your student contribution to college each year, whether you have restrictions on the money or not. 

8. Make an appointment with your financial aid administrator. If your family has unusual circumstances, exceptions may be made. Also, your parents can negotiate your aid package.