Little Tweaks in Your EFC Can Maximize Your Need-Based Aid

Similar to minimizing your taxes, maximizing your financial aid is a learning process. If you think taking an extra measure to learn is too tedious and that you cannot do any better, you may be losing out on a large amount of free money and paying for the college of your choice more than you need to.

Financial aid is broadly divided into two parts, merit-based and need-based. Merit grants are provided for academic excellence or special skills. Need-based aid, on the other hand, is determined by a family's income and assets, and the cost of the colleges they are considering.

How much need-based aid your child receives is conditional on the figures entered into their FAFSA (Free Application for Federal Student Aid) profile. The output of these forms is the EFC (Expected Family Contribution.) This, according to the government, is the amount you should be able to "contribute" towards the cost of your child’s education.

If you want the EFC to change, you cannot impulsively fill in the figures and hope for the best. There are in fact four categories that you can make changes in which will affect the EFC. The first is your (the parent's) adjusted gross income. The second is the parent's assets. The third is your child's adjusted gross income. The fourth and last is your child's assets.

Income

The EFC is considerably weighted toward income, even more so than assets. That being the case, it is important to refrain from artificially increasing earnings throughout the base year, two tax years prior to the FAFSA award year. This is particularly important if you are close to the $50,000 income threshold for the Simplified Needs Test.

Assets

Even though assets are not as much important in the federal financial aid formula, they still can have an effect on your eligibility for need-based grants. To be specific, assets in the student’s name have a more major impact on aid eligibility than assets in the parent’s name. As a result, it is important to save and spend assets strategically.

Increasing your basis for need-based financial aid is not a one-step overnight project. It is a process that usually depends upon a professional, although with enough time and effort, you can manage it yourself. The key is to be acquainted with how the details of how the system works and the traps to be on the lookout for.