Financial Aid Strategies: Maximizing Financial Aid
School Choice Strategies
For financially strapped students, choosing a college may have more to do with affordability than any other factor. Students should not assume however, that affordability is synonymous with low tuition rates. For some students, affordability has much more to do with the amount of financial aid awarded. Below are some strategies that take this knowledge into consideration.
- Apply to a low-cost school - Students should apply to schools that have a variety of price tags including at least one low-cost option that would be affordable if loans are the only source of financial aid. Thus, if the more expensive schools don’t award the needed financial-aid, the student will still have an affordable option.
- Aim to be in the top 20 percent - To maximize the chances of obtaining school-based grants and scholarships, if possible students should apply to schools where they will be in the top 20 percent academically. Schools are motivated to provide an extra financial incentive to this group of students.
- Meet with financial aid counselors - When choosing schools to apply to, students and any family sponsors should make appointments with the financial aid counselors at the schools to gain a better understanding of how much aid the student is likely to get from that school.
- Ask if adjustments can be made - Financial aid offices have flexibility in how they award their financial aid funds so if the award package from a student’s preferred school is not as favorable as another’s, he/she should talk to the financial aid office to see if any adjustments can be made.
Application Strategies
Completing financial aid applications in a timely manner and with a high level of accuracy is a critical step on the road to receiving financial aid. Following are some strategies to ensure this process goes smoothly.
- Everyone should file the FAFSA - Students should always file the Free Application for Federal Student Aid (FAFSA) even if they don’t think they will qualify for financial aid. Almost every student and their parents will be able to take out federal loans, which are less costly than private loans, but only if they submit the FAFSA.
- Get an early indication of eligibility for aid - The FAFSA4caster tool can be used to get an early idea of student’s federal aid eligibility. Some of the information can be transferred over to the FAFSA when it’s time to complete the official application.
- The FAFSA must be completed honestly and accurately - One third of FAFSA’s are verified and some schools verify all of them. Punishments for purposely falsifying information are substantial and can include fines and even prison time. Mistakes can have a big impact on the amount of financial aid awarded.
- The FAFSA should be completed as soon after January 1 as possible - Some aid is given on a first-come, first-serve basis, so the earlier the FAFSA is filed, the better.
- File the CSS/PROFILE® whenever it is required - Students must make sure to file the CSS/PROFILE® application for each school that requires it as well as any other school-specific applications that are required.
- Start tax filings early - Students and their parents or family sponsors should start preparing their 1040 forms even before they have all their tax information so they’ll be ready to start filling out the FAFSA as soon after Jan. 1 as possible.
- File financial aid applications every year - The FAFSA and most other financial aid applications have to be completed every year in order to continue receiving financial aid.
Financial Strategies
The methodology used to calculate the Expected Family Contribution (EFC) amount for federal aid treats some assets differently than others. The following strategies make the most of the federal EFC methodology.
- Keep college money in parent's name - Money saved for college should be in a 529 plan, Coverdell ESA or in a savings account in the parent’s name. Avoid putting college savings in the student’s name since EFC calculations assume more of a student’s savings will be used to pay for college than parent’s savings.
- Pay down debts - Debts such as credit cards and auto loans are not considered in the EFC calculations but savings are, so it is best to pay down debts and reduce savings before filing the FAFSA.
- Make planned expenditures before filing FAFSA - When possible, make planned expenditures such as home improvements or purchasing a car before submitting the FAFSA since savings are counted as a resource but a car and home are not.
- Consider delaying the start of college - A student with a younger sibling may want to consider delaying college if it will mean siblings will overlap college for more years. The parent’s expected contribution will be divided by the number of children in college at the same time, resulting in a much lower EFC for each child.
- Avoid withdrawing money from retirement accounts - Parents should avoid withdrawing money from any retirement account until the last year of school since withdrawals will be included as income on the next year’s FAFSA.
- Use retirement money for college wisely - If retirement money needs to be used to pay for college expenses, the best choices may be to take a loan against a retirement account or to withdraw money from a regular IRA account since it will be free from the normal ten percent penalty taken when the owner is younger than 59½.
Resources
Free Application for Federal Student Aid (FAFSA) - Starting point for online FAFSA application.
FAFSA4caster - Online estimator of eligibility for Federal Student Aid.
College Board's CSS/Financial Aid Profile - Starting point for online CSS/PROFILE® application.
