True or False: Saving for College = Less Financial Aid

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Typically, that’s true.

Unless you know the rules of the game…

The Free Application for Federal Student Aid (FAFSA) focuses on income and assets, primarily income. The FAFSA will assess income at 22%-47%, while assessing assets at roughly 5.6%.

Sure, for every dollar you save, you might lose 5.6% in financial aid. But, how many families can afford to direct 22% or more of their income toward the annual cost-of-attendance at their student’s school of choice?

So, in reality, if a family’s income can’t cover the cost, savings can be drastically impacted.

What should you do?

  • Don’t save money in your child’s name. Doing so could cost you up to 4 times as much in financial aid than keeping the money in your name.
  • Be careful when using a 529 Plan. While it may help a little with the family’s tax situation, such a plan can have a negative impact on eligibility for aid.
  • Minimize your income. Please don’t ask for a pay cut!! There are other ways to minimize income in favor if increasing eligibility for aid.

Please be aware, the more income and assets you have, the higher your Expected Family Contribution (EFC) will be. The higher your EFC, the greater the likelihood that loans will play a part in the offer of financial aid.

In fact, it’s almost a certainty that loans will play a big part in the financial aid offer.

Contact us for assistance in developing and implementing a college planning campaign designed to reduce your family’s EFC and improve its eligibility for financial aid.

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