If you have a student planning to attend college this fall and are going to submit the Free Application for Federal Student Aid (FAFSA) this year, then planning now can pay off. There are some financial moves you can make now that could help increase the amount of student financial aid this year. There is no magic here. But if your income is modest and you have several students in college at the same time, then planning now can help. Make a few of these moves and you could see increased federal student loans and eligibility for more work/study programs.
Here are some moves to consider for parents getting ready to file the FAFSA for a financial aid award for this year:
Deplete your savings: Use your cash in savings to pay down debt, make additional mortgage payments, contribute to an IRA or buy items such as computers, a car, etc. The federal methodology does not consider consumer debt, the amount of retirement accounts, mortgage on your primary home or recent purchases of a car or computer. But some of the cash you have in savings is to be used towards the expected family contribution towards tuition.
Move money out of student's name: Money held in the student's name is treated especially harshly, with over a third of it required to be used towards education costs. But assets held in 529 accounts are treated as parents' assets, where only 5.64% is required to be used towards college costs. If you own any 529 plan accounts, consider owning these in the grandparents' name, with the student as the beneficiary. Grandparent-owned 529 plan accounts are not includable assets for financial aid purposes.
Go back to school: Enroll in education courses at the same time your student is applying for college. If you are planning to go back to school for additional education, then timing your enrollment in the same year your student is applying for federal aid could help. Be prepared to provide proof of your enrollment to a financial aid administrator.
File 2011 tax returns now: Before you file the FAFSA for the 2012 award year, prepare and file your 2011 tax return. Doing so will allow using the actual figures for income and tax liability instead of having to make estimates, which could be too high.
File FAFSA ASAP: To allocate financial aid funds fairly, financial aid administrators distribute funds on a first-come basis. When the aid is distributed, there is no more available until the next year. Although the federal deadline to file the FAFSA is June 30, you'll want to get your application filed as soon as possible, as early application increases your chances for aid. Also, check with your state and school because they may have earlier student aid deadlines. For example, the filing date in Florida is May 15. So get this done by the end of February.