If you are the parent of a highschool student that is intending to go to school, you've got to understand how the FAFSA works and how it can often help your folks qualify for more financial aid. There are a few highly specific systems that you can utilise in order to help reduce your EFC (Expected Family Contribution) and increase your student aid. But you need to get started now, before your child graduates, if you plan to take full advantage of your prospects.
Here are three simple strategies that you can use at this time to help restructure your financial support efforts.
Methodology 1: Reduce Student Savings - If your kid has been fortunate enough to earn or save in their own name, this is great. Sadly, if your student has savings or investments in their own name, the university financial aid formulas will add 20 percent of those savings to your EFC. Parent's savings and investments are also added, but only 5 p.c of a parent's includable assets are added to the EFC. So it is smart to keep the student's savings out of their own name or redirect them into non-includable areas.
Method 2: Reduce or Restructure Parent Savings - While parent savings are treated better than student savings, it is still important to take acceptable measures to reduce the amounts that are utilised for financial aid purposes on the FAFSA. Retirement plan savings, tax deferred accounts and small business assets aren't included for financial support purposes. If you can reposition some of your assets into these areas, you will usually get an income tax break as well as a lower EFC and higher financial help award.
Methodology 3: Reduce Parent's Taxable Earnings - Another area where many families can make enormous financial support progress is by reducing your family taxable revenue. By maximising 401K, IRA, HSA and other income tax-efficient savings and making full use of your itemized refunds, you can reduce taxable revenue noticeably which lowers your EFC and can raise your student aid.
Summary: By working on these three systems now, you will see a direct financial benefit for your attempts. You're going to need to take care of these actions by December 31st of your student's senior year in high school (sooner if at all possible) to maximize the benefits during their first year of university. If you can make these a priority in your total financial aid strategy, you will be further ahead than most incoming freshman families and your attempts will be rewarded for the subsequent four years.
Here are three simple strategies that you can use at this time to help restructure your financial support efforts.
Methodology 1: Reduce Student Savings - If your kid has been fortunate enough to earn or save in their own name, this is great. Sadly, if your student has savings or investments in their own name, the university financial aid formulas will add 20 percent of those savings to your EFC. Parent's savings and investments are also added, but only 5 p.c of a parent's includable assets are added to the EFC. So it is smart to keep the student's savings out of their own name or redirect them into non-includable areas.
Method 2: Reduce or Restructure Parent Savings - While parent savings are treated better than student savings, it is still important to take acceptable measures to reduce the amounts that are utilised for financial aid purposes on the FAFSA. Retirement plan savings, tax deferred accounts and small business assets aren't included for financial support purposes. If you can reposition some of your assets into these areas, you will usually get an income tax break as well as a lower EFC and higher financial help award.
Methodology 3: Reduce Parent's Taxable Earnings - Another area where many families can make enormous financial support progress is by reducing your family taxable revenue. By maximising 401K, IRA, HSA and other income tax-efficient savings and making full use of your itemized refunds, you can reduce taxable revenue noticeably which lowers your EFC and can raise your student aid.
Summary: By working on these three systems now, you will see a direct financial benefit for your attempts. You're going to need to take care of these actions by December 31st of your student's senior year in high school (sooner if at all possible) to maximize the benefits during their first year of university. If you can make these a priority in your total financial aid strategy, you will be further ahead than most incoming freshman families and your attempts will be rewarded for the subsequent four years.
About the Author:
Mike Hoff mom and dad died in an auto crash. Mike started to work at a young age as a autos sales reps and progressed on to do personal loans in the car dealer after he got married as the hours were more regular. He discovered that many folks were not finance savvy, and moved on to be a financial advisor which gave him a better revenue and extra time for his folks. His first boy, James, was named after his pop James Hoff.
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