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Financial Aid: These Moves Can Help You Get More

Here's a great question: "I have to fill out the FAFSA in March for financial aid for my son who is going to college this fall and wanted to know if there are any financial moves I should be considering to increase the federal aid he could receive."

If you are preparing to submit the FAFSA this year, there are definitely some financial moves you can make now that could hep increase the potential amount of financial aid for your student THIS year. There are also some moves you can make this year that can better position your finances for when you submit the FAFSA again NEXT year. There are no silver bullets here: unless your income is very low and/or you have a lot of students in college at the same time, don't expect any moves to result in loads of free money such as scholarships, grants, etc. But make a few moves now, and you could see increased federal student loans and more from work study programs.

Here are a few moves to consider for THIS year:

  • Use 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, money in retirement accounts, mortgage on your primary home, or recent purchases of items that students will need at school, such as a car or computer. But some of the money you have in savings is expected to be used towards the family's contribution.
  • Move money from your student's name to a 529 plan or to your account. 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 parent's assets where only 5.6 percent is required to be used towards college costs. If you have any 529 plan accounts, consider owning these in the grandparent's name with the student as the beneficiary -- grandparent-owned 529 plan accounts are not includable assets for financial aid purposes.
  • 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 to the same year your student is applying for federal aid could help how much aid you get. Be prepared to provide lots of proof of your enrollment to a financial aid administrator and to go through a special review for your circumstances to qualify.
  • File your tax returns now. Before you file the FAFSA for 2010, prepare and file your 2009 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 your FAFSA early. In an effort to distribute financial aid funds fairly, financial aid administrators will distribute funds on a first-come basis; when the aid is distributed, there is no more available until the next year. Although the deadline to file the FAFSA is June 30th , you'll want to get your application filed as soon as possible since early application increases your chances for aid. So try to file your application by the end of February.
Later this week, I'll write about a few moves you can make this year that can better position your finances for when you submit the FAFSA again NEXT year.