While your child is devoting their time to filling out college applications, it’s a great idea for you to start thinking about how to improve their chances of getting a generous financial aid package.
It’s absolutely necessary to apply for financial aid to see what kind of loans, scholarships, or grants the school and federal government will offer your child. If they are given a great package with scholarships and grants, they might be able to avoid taking out private student loans altogether.
You can get started helping your child improve their chances of getting a hefty financial aid package today by following these tips:
File As Early As Possible
First things first, fill out your Free Application for Federal Student Aid (FAFSA) form early on and turn it in as soon as you can. Why is this so important? Many grants and federal loans are given out based on who applies first. The earliest date you can file the form is on October 1st. So, turn in your form on this date or soon after each year to boost your chance of getting a great financial aid package.
A lot of parents make the mistake of thinking they should complete the FAFSA after their previous year’s tax return. However, this can hurt your ability to get need-based assistance. Your financial aid forms should be filled out with the previous year’s tax information. You can access this information with the IRS Data Retrieval Tool on the official FAFSA website.
Put Taxable Income Into Different Accounts
Let’s talk logistics. Colleges use FAFSA to see how much your family can contribute money-wise towards tuition and other college costs. If they think your family can’t contribute a lot of money, often times, they will give you a bigger needs-based financial aid package.
Colleges mostly look at your family’s income to determine how much your family can contribute. For this reason, you want to limit the amount of taxable income in your checking, savings, and investment accounts. A good way to do this is by transferring money into IRAs and other retirement accounts. Colleges won’t consider the money you have in these accounts as part of your income that could be used for tuition. Be careful about which accounts you choose as some won’t let you access the money you contributed until you’re of retirement age.
Reduce Assets in Your Child’s Name
Did you know that colleges assume 20% of a student’s assets and 5.64% of parents assets can be used for college tuition?
For this reason, your child will want to lower the assets in their name to increase their financial aid package. They can do this by using the money in their accounts towards big purchases before January of the year they start college (this is called the “base year” on FAFSA forms).
Now, your child doesn’t need to go on a spending spree. But maybe they need a car, microwave, bedding, or other items before they go off to college. Using their money rather than your own will lead to them getting more financial aid.
Another option is to transfer your child’s money into your account or put it into a CD under your name before they become a senior. If your friends or family members want to make contributions towards your child’s college funds, be sure to put the money in your account (not your child’s), or even better, a college savings plan for your child, such as a 529 plan through the Sootchy app.
The costs of college can be overwhelming for parents and students alike. Taking the steps necessary to receive a sizable financial aid package can help relieve some of the stress related to paying for college.
If you follow these tips and start saving for college as soon as possible, you will give your child a better chance at a debt-free future after graduation.
Do you know other ways to receive more financial aid for college? Let us know in the comments.