January 20, 2010

Over the next few weeks, many of us will be filling out the dreaded FAFSA (Free Application for Federal Student Aid) online to try to score some financial aid for our children in college. Here are some guidelines to help you maximize your future financial aid package:

  • Save money in the parent's name, not the child's name. Or use a savings vehicle that is treated like a parental asset, such as a 529 college savings plan.
  • Use extra cash to pay off consumer debt, such as credit cards and auto loans.
  • Pre-pay mortgage balances.
  • Spend down the student's assets and income first.
  • Avoid taking capital gains while your child is in school.
  • Maximize your contributions to retirement accounts.
  • Do not withdraw money from retirement accounts to pay for school, as distributions count as taxable income. Instead, borrow the funds - but only if you have no other reasonable options.
  • If grandparents are offering financial help, have them do it through a 529 plan.
  • Choose the date you submit the FAFSA carefully, as assets are recorded as of the date of the application.
Those who carefully manage their assets and cash flow can maximize the FAFSA bottom line.

When all else fails, remember: don't fumble! PUNT!

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).