(MoneyWatch) Now is the time to think about some money moves you can make that can increase the amount of college financial aid your student receives. I'm not saying you can magically get loads of free money for college by using a few financial gimmicks, but you can increase the amount of federal student loans and work study aid your student qualifies for by making a few strategic financial moves.
First, if you have significant savings, schools will expect you to use a portion of that money for college expenses. The more money the government believes you can contribute to your child's college education, the less money it's willing to lend you. So, before you apply for financial aid, consider using some of your savings to pay down debt, make additional mortgage payments, contribute to your 401(k) or an IRA or buy big-ticket items such as a car or computer. This helps because when figuring out aid eligibility, the federal financial aid methodology does not take consumer debt, retirement accounts, the mortgage on your primary home or recent purchases into account.
Next, if your student has any money that's been saved in her own name, move it to a 529 plan, or transfer the assets to your name. The government expects students to apply over a third of their own money towards education costs. On the other hand, only 5.6 percent of a parent's savings are required to be used for college expenses. The same goes for assets in a 529 plan account. And here's another hint: If the 529 plan is in a grandparent's name, with your student listed as beneficiary, none of that money is considered when determining financial aid.
Before you fill out the FAFSA form - the Free Application for Federal Student Aid form - file your taxes so you're working with your real income and tax liability numbers. You're allowed to use estimates, but you don't want to risk submitting figures that are too high.
And finally, get that FAFSA form in the mail as soon as possible. Financial aid administrators distribute funds on a first-come, first-served basis. And when the money's gone, you're out of luck until next year.