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Increase Your Financial Aid

by Emily Guy Birken

Whether you have a high school senior who is in the midst of applying to colleges for the 2012 school year or a bouncing baby who has yet to master potty training, let alone higher learning, chances are that you want to find some ways to save money on college costs. There are many ways to do this, including scholarships, work study programs, and more. But one topic that is often overlooked is increasing your financial aid package. Most financial aid programs base their aid packages on a weighted formula which takes into account the student’s or parent’s assets with the general assumption that the fewer assets you have, the greater the potential for a financial aid award.

Tips for Increasing Financial Aid

There are different strategies for maximizing your college financial aid package, depending on where your child attends school and various other factors. The common idea is to find ways to reduce the amount of assets you own which count against you for financial aid reasons. We’re not talking about hiding assets, rather making sure they are in the right place to be most effective (ex: investments in retirement accounts don’t count against you for college financial aid). The following tips can help you maximize your child’s student aid eligibility for college.

If You Have Plenty of Time

It’s never too early to start planning for college, particularly since tuition generally rises at about twice the rate of inflation. That being said, there are a few important points about college savings:

1. Prioritize your savings goals. As many of you have recently reminded me, parents need to save for their retirement more they need to save for Junior’s college fund. Your children can take loans to get an education, but there is no such thing as a loan for retirement. In addition, your retirement fund is not included among your assets when a school analyzes your student’s financial needs. So not only is saving for retirement a good plan for your own future, it will also help to maximize your child’s aid package when the time comes.

2. Make sure you save for college in a 529 plan or in your own name, rather than your child’s. The formulas for analyzing student need assume that more of the child’s assets will be contributed to college costs than those of the parent. So $20,000 saved in Junior’s name will count as money that can all be used toward education costs, whereas the same amount of money in Mom and Dad’s savings account will be treated as money that the whole family might need to use.

Saving for college in a 529 is a good way to avoid this problem—these plans offer tax benefits and 529 plans are not considered an asset when calculating financial need, provided the plan is custodial (meaning your child is both the account owner and the beneficiary). Savings in a 529 plan can also be used for anyone in the same family while still maintaining its tax benefits.

If Your Child Is In High School

You may be several years away from dropping your child off at Freshman orientation, but now is a great time to make some financial choices that will help Junior get the best offer of financial aid:

1. Maximize your contribution to retirement. This may give you the kick in the pants necessary to put your retirement savings in gear. Having a huge college expense coming can be the motivation necessary to help parents remember to pay themselves first, with the bonus of knowing that every dollar spent on their future is a dollar schools can’t consider an asset when allocating aid to their child.

2. Plan out your necessary major purchases. Though some of your property is considered an asset in the needs analysis, others, like cars, computers, furniture, and appliances are not. If you know that you will have to replace a major appliance or automobile sometime in the next few years, plan to do it before you have filled out the FAFSA. Then the money you have earmarked for you new car is not counted among the assets that could help pay for Junior’s tuition.

If You’re Applying to Schools This Year

Even if your child’s imminent departure is looming, there are still steps you can take now to maximize her financial aid package:

1. Fill out the FAFSA form early. You can submit the FAFSA anytime after January 1 of the year that your child will be a freshman. You want to start this process as soon as you can, as some schools give out money on a first-come-first-served basis. The earlier you have the big paperwork out of the way, the easier it will be to meet the college-specific deadlines that you run into.

2. Be willing to use leverage. If your child is considering several schools, don’t be afraid to tell her first choice that another institution is offering more money. These offers are not confidential, so feel free to tell a school that you will enroll should they match another university’s offer. This is especially effective if the schools are rivals.


Published or updated October 20, 2011.
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{ 2 comments… read them below or add one }

1 Maria Wantell

I am single parent with a 17 year old son who made into SVA now his financial aid letter was not enough he needs $7000.00 more per semester and private loans want cosigner on loan which i am unable to get what can i do? Any advise? the Stafford loans total $5500 which is not enough. I am not in position to pay for his school. I live on fixed income of workman compensation. Please help us!

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2 Emily Guy Birken

@Maria, contact the financial aid office at the college and ask to speak to a financial aid counselor. They should be able to help you determine what options are available to you. Best of luck to you.

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