Student financial aid, like most anything financially related, involves strategy and a bit of finesse to make your money and time work for you. Some might believe that receiving the offer you were hoping for from the Free Application for Federal Student Aid (FAFSA) is a matter of luck. However, there is more to it than that. There are, in fact, measures that can be taken to enhance the amount of aid you may be eligible for.
Here are six simple steps to boost your FAFSA eligibility:
1. Try to minimize your income level in the base year
Universities generally rely heavily on a family’s expected family contribution (EFC) when determining who needs more aid. Your EFC is how much the parent/s and student can help with expenses along with aid being received. A lower EFC calculation indicates that the student has a greater need for assistance. Income level is an essential factor when this calculation is being done. Keeping your income level as low as possible in the base year can help your EFC total be lower. Several ways to help accomplish this is to do the following:
- Postpone early withdrawals from your 401(k) or IRA.
- Hold off on selling stocks and bonds that may generate a profit and count toward income.
- If you get a bonus at work, ask your company if they can hold off on giving it to you until it no longer affects your child’s loan calculation.
2. File for aid as soon as possible
If you file for financial aid early, you generally qualify for more scholarships and grants. Many states award grants on a first-come, first-serve basis. Students who take the initiative and submit their FAFSA forms between October and December typically qualify for twice the amount of grants compared to students who wait.
3. Be strategic in your college saving
It might sound bizarre, however, money that is listed in a parent’s name is assessed at a lower rate toward your EFC than if it was in the student’s name. The assessment rate of money in a parent’s name is around 5%, whereas it is a flat 20% if in a student’s name. Therefore, it is better to save money in the parent’s name. If you have been putting money toward a 529 college savings plan for the past few years, don’t panic; these funds are treated as if the asset were in the parent’s name.
4. Multiple children enrolled in college at the same time
A family that may not have qualified for financial aid when one child was in school may qualify when two or more children are enrolled simultaneously.
5. Dependency Status
Determining whether your student is considered independent or dependent is given a careful review. To be considered independent, you have to fall into one of two categories.
- If you get married before filing your FAFSA application
- If you delay college until age 24
Being an independent student doesn’t automatically lead to a boost in eligibility for aid. However, it does establish that your parent’s financial situation is considered in the need analysis process. If you get married, you must include financial information for you and your spouse.
6. Consult a financial professional
Ensuring your eligibility status for FAFSA in such a highly competitive environment is critical. Consider scheduling a meeting with a financial professional to discuss what steps align with your financial goals and your child’s college aspirations.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
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