Maximizing Your Aid Eligibility
This page presents a list of strategies for maximizing your eligibility for need-based student financial aid. These
strategies are based on loopholes in the need analysis methodology and are completely legal. Parents should be
aware of these strategies to avoid several common mistakes that can negatively impact eligibility for financial aid.
We developed these strategies by analyzing the flaws in the Federal Need Analysis Methodology. It is quite
possible that Congress will eventually eliminate many of these loopholes. Until this happens, we believe that
revealing these flaws yields a more level playing field and hence a fairer need analysis process. For example, why
should a parent who conscientiously saves for her children's college education but makes the mistake of saving the
money in her child's name get less aid than a parent who saves the money in her own name?
Many of these strategies are just good, sound financial planning. For example, using cash in the bank to pay off
credit card debt will benefit the family financially, by reducing the amount of interest they are paying, in addition to
improving the family's eligibility for student financial aid.
These strategies are similar to those used by many financial aid consultants. Financial aid consultants charge fees
to help you complete the Free Application for Federal Student Aid (FAFSA) and other financial aid forms in a way
that minimizes your Expected Family Contribution (EFC), among other services. If you decide to use a financial aid
consultant, you should do so with the knowledge that you can complete the financial aid applications on your own,
at no cost.
Top 10 Strategies These strategies will have the largest impact on need-based aid eligibility.
1. Save money in the parent's name, not the child's name. Or use a savings vehicle that is treated like a
parent asset, such as a 529 college savings plan, prepaid tuition plan or Coverdell Education Savings
2. Pay off consumer debt, such as credit card and auto loan balances.
3. Parents should go back to school to further their own education at the same time as their children, or have
multiple children in college at the same time. The more family members in college simultaneously, the more
aid will be available to each. (Note: This strategy is not as effective as it once was, as whether the parents
count is now an item subject to professional judgment review. The school will want to see documentation
that the parent is genuinely pursuing a degree, since this is prone to fraud. Many schools will merely
reduce income by the amount the family spends for the parent's education, instead of increasing the
number in college figure.)
4. Spend down the student's assets and income first.
5. Accelerate necessary expenses, to reduce available cash. For example, if you need a new car or
computer, buy it before you file the FAFSA.
6. If you feel that your family's financial circumstances are unusual, make an appointment with the financial
aid administrator at your school to review your case. Sometimes the school will be able to adjust your
financial aid package to compensate using a process known as Professional Judgment.
7. Minimize capital gains.
8. Maximize contributions to your retirement fund.
9. 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.
10. Minimize educational debt.
11. Ask grandparents to wait until the grandchild graduates before giving them money to help with their
12. Trust funds are generally ineffective at sheltering money from the need analysis process and can backfire
13. Prepay your mortgage.
14. A section 529 college savings plan owned by a parent has minimal impact on financial aid, and one owned
by a grandparent has no impact on financial aid.
15. Choose the date to submit the FAFSA carefully, as assets and marital status are specified as of the
For the full article, go to: http://www.finaid.org/fafsa/maximize.phtml