College is expensive and everyone could benefit from a few tips on how to maximize the aid they receive from colleges. Just knowing a few tricks of the trade can help you save thousands in college costs. Here are some helpful financial aid tips to think about when it comes to your assets.
1. You should ask the college about its policy regarding annuities and the cash value of life insurance as some elite privates, will assess these assets.
2. If your child has a job and has earned income, consider buying a Roth IRA and saving money for college using this investment vehicle. The money grows tax-free and withdrawals are assessed under the first in – first out rule which means funds are tax-free until all of the original contributions are withdrawn.
3. The value of your retirement account will not be used against you to calculate your expected financial contribution (EFC), therefore, saving for college using retirement accounts and then borrowing from it to pay for college may work but should only be used as a last resort when all other sources of paying for college have been exhausted (i.e. savings, federal loans, grants, and scholarships).
4. If you plan on buying your child a personal computer, a non-assessable asset, for college then it is a good idea to pay for a personal computer using an assessable asset, such as cash. If you do this before you fill out the financial aid forms you can reduce the effect your assets will have on your EFC.
5. You should consider paying off any personal debt that has a high-interest rate with an assessable asset (i.e. savings or cash).
6. If you claim a second home, (i.e. boat or motor home) as an interest expense deduction on Schedule A, these items will become assessable assets.
7. If you have assets tied up in probate and you cannot withdraw any of the assets during the college years, you should appeal to the Financial Aid Administrator (FAA) because claiming this asset on your financial aid forms will increase your EFC.
8. If access to your child’s trust funds is restricted until after college years, the value of the trust should be appealed to the FAA. If the money is not available during the college years it should not count against you.
9. If your child is the beneficiary of a Qualified Tuition Plan (QTP)/529 Plan and qualifies for financial aid, you should consider transferring the QTP to another beneficiary.
10. If possible, you should sign the financial aid application forms on the date when your assets are at their lowest value – presumably at the end of the month when you pay all of your bills.