How to Get More Money from FAFSA Financial Aid

Preparing to apply for Federal Financial Aid and fill out FATSA application is like preparing to apply to a college.  It takes a careful planning to yield optimal outcome; more money provided by the government in this case. There are strategies that will net you higher dollar amount.

Things can get a little trickier if your family has a 529 plan with your name the beneficiary.  A 529 plan is a program set up by a state to help you save for college. Earnings accumulate tax free within the account and you shouldn’t face a tax liability in most plans if you use the funds for approved college expenses such as tuition, books and room and board.

According to savingforcollege.com:

The FAFSA is a form used by the U.S. Department of Education to determine your eligibility for federal aid.
Income, assets and other information from a family’s federal tax return are analyzed to calculate your Expected Family Contribution (EFC). The EFC represents how much a household is able to contribute to paying for college, so a higher EFC means less financial aid.
You may have heard that savings in a 529 account will increase your EFC and reduce your eligibility.
While this is true, the effect 529 assets have on your financial aid eligibility is significantly less than the effect of other savings vehicles.
Funds in a 529 account are considered parental assets, whether the account owner is the parent or the student.
A parent’s non-retirement investment assets are assessed at a maximum rate of 5.64% when determining the EFC. Savings in UGMA/UTMA accounts, however, are considered a student’s assets and are assessed at 20%. That means if you have a 529 plan worth $100,000 on the day you file the FAFSA, your EFC will likely increase by $5640. But, if you instead chose to save with an UGMA/UTMA account, your EFC would have increased by $20,000, meaning much less financial aid for you.

Additionally, there is more to it for those students who have generous and caring grandparents:

While we encourage grandparents to join in on the advantages of 529 plans, there are a couple things to keep in mind. If a grandparent takes a 529 distribution to pay for college expenses, the amount will be counted as student income on the following year’s FAFSA.
When calculating your EFC, student income is assessed at a whopping 50%! To lessen the blow, grandparents can contribute to an account that is owned by the student or parent, or they can wait to make withdrawals until the student’s junior year of college after their last FAFSA has been submitted.

Oh, did you know that many states have different application deadline for FAFSA?  Check out the deadline for your state here

Federal Student Aid Website