More than 65% of all student aid comes from the federal government. Mark Kantrowitz, creator of the Financial Aid Information Page (http://www.finaid.org) and author of "The Prentice Hall Guide to Scholarships and Fellowships for Math and Science Students" (Prentice Hall Trade, 1993), knows all the tricks when it comes to increasing your family's share of that money. Here are three of his tips.
- Save money in the parents' name, not the kids' name. Many financial planners will tell you to put college money in your kids' accounts. But when it comes time to apply for financial aid, the kids take a big hit. There might be some slight tax advantages to saving in their name, but the benefits are outweighed by the reduction in eligibility for financial aid. That's because the federal formula used to calculate the expected family contribution assesses 35% of a child's assets, meaning that if you've put $100,000 in your child's account, the Feds can take $35,000 off the top of any financial aid loan. However, the government assesses less than 6% of the parents' assets.
- Buy a car or pay off your credit card debt. Assets like the value of your car and debts like credit card debt aren't considered in the federal formula. Money in the bank is . So before you apply for financial aid, shift cash into other assets or pay off your debts. For example, suppose you owe $5,000 on your credit cards and you have $5,000 in your bank account. If you don't pay off the credit card debt, the federal "needs analysis" sees $5,000 in your bank account but not the $5,000 you owe. If you do pay off the debt, your assets will drop from $5,000 to zero.
- If you're planning a family, have your kids as close as possible in age. The parents' portion of the expected family contribution is divided by the number of children who are in college simultaneously. For example, Kantrowitz has an older brother with twins and a younger brother with kids who are four years apart. If college costs $25,000 per year and the parent contribution is $20,000 per year, his younger brother will pay the full $20,000 per child and receive just $5,000 per year in aid. But the twins will get $15,000 each in aid -- three times as much as his younger brother's children, simply because they'll be in college at the same time.
Coordinates: Mark Kantrowitz, firstname.lastname@example.org