By Liz Weston
LOS ANGELES Jan 21 If you know much about
college financing, you probably know the basics of improving a
financial aid package: Save in your own name, rather than your
child's, fill out the Free Application for Federal Student Aid
as soon after Jan. 1 as possible and look for scholarships and
other "free money" that can reduce your costs.
But many other strategies can also increase your financial
aid. Here are seven of them:
SEEK OUT GENEROUS SCHOOLS
Most colleges and universities do not provide enough
scholarships, grants, loans and work-study to pay for all of
their students' expenses. Some, however, are committed to
filling 100 percent of those needs, and they are the colleges to
seek out if you really want to reduce your costs, says Lynn
O'Shaughnessy, author of the book "The College Solution" and
website of the same name.
Typing a school's name into CollegeBoard's "College Search"
function () will show you the
percentage of student expenses the college meets and the average
size of aid packages.
SPEND DOWN STUDENT ASSETS
Before applying for financial aid, you can spend down
savings, brokerage and custodial accounts in the student's name
as long as what you buy benefits him or her, says Mark
Kantrowitz, senior vice president of the Edvisors network of
education resource sites.
The author of the upcoming book "Filing the FAFSA,"
Kantrowitz says the spending cannot be for expenses the parent
is typically obligated to provide, like food, housing, medical
But summer camp, a new computer or tutoring may all qualify.
Check with a tax pro.
SEND SOMEONE ELSE TO COLLEGE
Your "expected family contribution" will drop when you have
more than one family member in college at the same time,
"While (the expected family contribution) might be $30,000
for one child, when you have two in school, the expected family
contribution for each child drops to $15,000," she says.
A smaller expected family contribution typically means more
aid per student.
If your kids are close in age, it may make financial sense
to have the older one put off enrollment or get requirements out
of the way at a cheap community college first.
MOVE MONEY INTO RETIREMENT ACCOUNTS
Qualified retirement accounts such as 401(k)s and IRAs do
not count as assets when calculating financial aid, says college
consultant Deborah Fox of Fox College Funding.
Maxing out retirement savings opportunities for yourself and
your kid in the years leading up to college can help you move
money from "countable" accounts to ones that will not affect
your aid package.
But do not contribute money you expect to use for college
expenses, since withdrawals from retirement funds can trigger
taxes and penalties, and will be counted against the next year's
financial aid offer.
PAY OFF DEBT
You can make savings and other non-retirement accounts
effectively disappear from financial aid formulas by using the
money to pay off debts such as auto loans and credit cards,
Kantrowitz says. This also can help you reduce your expected
family contribution on the FAFSA, although the private school
form will take into account your increased home equity if you
are paying down a mortgage
Another way to reduce savings is to accelerate a planned
purchase. If you plan to buy a new car in the next few years,
for example, you might consider using your cash to do so before
the student's senior year in high school.
CHANGE YOUR CUSTODY ARRANGEMENT
The FAFSA asks applicants to list the income and assets of
the custodial parent's household. In the case of remarriage, the
income and assets of the stepparent are included as well,
regardless of whether he or she plans to help with school
Having the child move in with the less affluent parent can
result in a larger aid package. In the case of joint custody,
the "FAFSA parent" is the one the child spends more time with,
so it may be enough to simply extend his or her stay at one
LOOK AT THE SIMPLIFIED NEEDS TEST
If your family income is low enough, you may qualify for the
Simplified Needs Test, which disregards your assets when
computing your expected family contribution.
To qualify, the parents' adjusted gross income must be under
$50,000. All family members must be eligible to file simplified
IRS forms (1040A, 1040EZ), exempt from having to file tax
returns at all or are eligible for certain federal benefit
programs, such as free or reduced price-school lunch,
Supplemental Security Income or food stamps, Kantrowitz says.
If your family income is just above the $50,000 mark, you
could see a significant increase in aid by lowering it,
particularly if there are assets that would otherwise be counted
against your student.