facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause

Ways to Maximize your Financial Aid

Parents always want to know if there is a secret to maximize their student’s financial aid.  I have heard plenty of stories about tips and tricks and families “positioning their money creatively”. However, many times these strategies only impact the financial aid package minimally.  The financial aid package your child will receive depends on the below items:

  • Parental Income
  • Number of children in college at the same time
  • If the parents are divorced or separated
  • The child’s assets
  • Schools the child would like to attend

Notice that a parent’s assets are not on the list. This is because many times a family’s assets are primarily held in retirement accounts, which are not included in financial aid calculations.  Parental income has a greater impact on the financial aid than assets the parents hold, whether they are retirement assets or held in a taxable account. 

College Selection

Believe it or not, your child’s college list is a huge factor in determining the financial aid package.  Colleges and universities may limit or target certain types of students, so positioning your assets or income would have a minimal impact.  Below are a couple of examples of how a college may limit their financial aid:

  • Attend college as a nonresident – In this case, your student would be limited in their need-based financial aid due to the fact that many state universities limit the amount of financial aid they give to nonresidents.  A majority of the time nonresident students would only be eligible for merit scholarships from an out of state university.
  • Attend an expensive private school – Depending on the private school, they may only offer need-based financial aid in the form of a loan.  A parent’s assets or income would not have any impact on the process due to loans being the only form of financial aid.

A great starting point prior to applying at a college or university is to use the school’s net price calculator.  Using this tool will allow a family to understand the types of aid a school has available and how a parent’s assets and income impact the aid. 

Tips and Tricks

So, are there any tips or tricks for maximizing a financial aid package?  The first one might seem obvious but complete the FAFSA application.  Parents and students need to understand the timing of the application process as schools will not alert them to any deadlines.  Parents should also understand that some schools require the FAFSA to be completed for merit-based aid. 

The next tip is to not include retirement assets on the FAFSA application.  As mentioned earlier, many families have the majority of their assets in retirement accounts.  The FAFSA application is not clear on whether to include or not, so even though this tip seems pretty obvious, many parents are not aware to EXCLUDE their retirement assets.

Another tip, if possible, is to not withdraw from a retirement account.  This withdrawal will be treated as income. However, if a withdrawal is for a financial emergency, a family can ask the school to disregard.  The process to ask for this exclusion is on a school-by-school basis, so check with the college on how they handle this type of transaction. 

When completing the household size, ensure you include anyone you are providing more than half of their support.  This number should include grandparents, aunts, uncles, stepchildren - anyone who is living with the family.  The size of your household is important due to the fact that the more people in your household, the greater eligibility for financial aid. 

Conclusion

You must remember that there are not any magical ways to maximize financial aid.  Prior to making any financial changes or attempting a strategy, you should test a potential move by using the EFC calculator, (discussed in a previous post), to determine if it would increase your chances to receive need-based financial aid.  If you need assistance or would like to have a conversation on how your assets impact a financial aid package, please go to my website,  https://michaelrebischkefa.com/ and schedule a 15 minute call to discuss your situation.

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 performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.


Check the background of this advisor on FINRA’s BrokerCheck.