Understanding the Financial Aid Landscape
Financial aid can be a game-changer for college-bound students. With billions of dollars awarded annually, knowing how to maximize your opportunities is crucial. The process begins with the Free Application for Federal Student Aid (FAFSA) but doesn't end there.
Mastering the FAFSA
File Early and Strategically
Submit your FAFSA as soon as possible after October 1st. Early filers often have access to more funds, as some aid is distributed on a first-come, first-served basis. For the 2024-2025 academic year, you can file from December 31, 2023, to June 30, 2025.
Optimize Your Base Year Income
The FAFSA uses your "base year" income to determine eligibility. For the 2024-2025 FAFSA, this will be your 2022 tax return. Consider deferring income or realizing capital losses to reduce your reportable income.
Manage Reportable Assets Wisely
Reduce reportable assets by paying off debt or using other strategic moves. Remember, every $10,000 reduction in parent income could increase aid eligibility by about $3,000.
Understand What's Not Reportable
Don't mistakenly report non-reportable assets. These include:
Retirement plans
Net home equity
Value of life insurance policies
Avoid Common Mistakes
Don't overestimate income. Report adjusted gross income, not gross income.
Be careful when reporting taxes paid. Don't confuse withholding with actual taxes paid.
Avoid taking money out of retirement funds to pay for educational expenses, as these are sheltered from the need analysis process.
Last-Minute Strategies
You can make last-minute changes to your assets before filing the FAFSA. Keep dated printouts from each account's website showing the balance after any changes.
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