10 Tips to Get the Most Financial Aid From Colleges

Finance Tips

10 Tips to Get the Most Financial Aid From Colleges

Published September 4, 2019 | Last Updated December 30th, 2023 at 11:52 am

Finance Tips

If you’re a parent of a high school student, make a resolution to gain a better understanding of how colleges determine their financial aid packages.

Unlike what a typical financial aid information evening at your child’s high school may lead you to believe, there are a lot more complexities that go on behind that financial aid package offer.

Don’t Wait Till Senior Year of High School – Sophomore Year Is More Important

It will be to your advantage to structure your finances as early as your child’s fall semester in their sophomore year to set up the best possible financial package. Parents of college-bound students need to understand that tax years and school years do not match up.

FAFSA forms use information from a family’s taxes from two years prior to when a student will be entering college.  For example – a high school senior, entering college in the Fall of 2024, will fill out the 2024-2025 FAFSA and report income from tax year 2022. 

For parents with high school sophomores and juniors, you need to understand that any financial decision you make in the tax year that ends in December of your child’s junior year, will have an impact on your position for getting the best possible financial aid package when your child is a college freshman. And this thinking goes on not just for the first year, but for the next four years from junior year in high school to the tax year ending when they are a sophomore in college. 

With the right guidance and some end-of-the-year tax strategies, you can come away with the lowest possible Student Aid Index, or SAI, when you and your child sit down in early October and complete a Free Application for Federal Student Aid form, or FAFSA. Families with the lowest incomes may have an SAI of 0 or up to -$1500 – meaning no ability to pay for college – and the wealthiest families may have an SAI above $100,000. There are financial aid strategies for both these scenarios, and everyone in between “if you know how to play the game.” You can get an early estimate by using the College Board’s EFC calculator and it is highly recommended you use it before your child’s senior year to avoid shock.

How Is Your SAI Determined?

A completed FAFSA form will calculate your SAI (Student Aid Index) number. This number determines if – and how much – you qualify for need-based financial aid. While many families complete the FAFSA on their own in a little over an hour, it might be worth a consultation this time of year with a financial planner, who specializes in educational funding, to figure out which assets to liquidate or which funds to transfer for tax purposes to leverage the best SAI outcome.

The Federal Method SAI Calculation takes into consideration four main areas:

  • Parent Income
  • Parent Assets (this does not include retirement funds or home equity)
  • Student Income
  • Student Assets

What most families don’t understand is that an SAI is actually four different calculations. There is a lot that you can do to determine the outcome of filling out your FAFSA. This includes how you structure your assets before filing your taxes.

Understanding how FAFSA calculates your SAI is key.

10 Strategies for Getting the Most Financial Aid

Once you have a better understanding of the FAFSA calculation, you may think twice about how to approach your savings, assets, and income, especially before the end of the tax year of your child’s first semester of junior year in high school.

Below are 10 strategies that could have a significant impact on need-based aid eligibility. These suggested strategies are meant to increase your awareness of different steps families can take to minimize their SAI, thereby increasing their eligibility for financial aid.

Since each family’s situation is unique, some or all of these strategies may not apply.

Each family’s SAI will differ based upon the four buckets discussed above (parent assets and income, student assets and income).

In addition, depending upon the total cost of attendance for each school and your SAI, your college funding strategy will vary based on these two factors. 

1.Minimize capital gains. Any capital gains realized from January of junior year and throughout your child’s sophomore year in college will be treated as income in your FAFSA calculation. If possible, offset any capital gains with losses to afford increasing your AGI.

2.Maximize pre-tax contributions to your employer sponsored retirement plans. Retirement savings and 401k accounts are shielded from the FAFSA formula and pretax contributions made to retirement accounts will no longer count as income in the new FAFSA formula, which means the potential for greater financial aid. 

3.Save money in the parent’s name, not the child’s name or move money in the student’s name to the parent’s before the second semester of junior year of high school. FAFSA assesses parent’s assets at 5.64% vs. 20% for assets in the student’s name.

4.Get Organized! Download Our Financial Aid Timeline…

Financial Aid Timeline


5.Compare your cost of money and evaluate if you have consumer debt (such as credit cards, auto loan balances or a mortgage) that you should consider paying off.  The FAFSA does not account for debt, so if you have savings and any outstanding debt, you might be better off using that money to reduce your debt load, rather than have it incorporated into your EFC. Remember, compare your cost of money – how much are you earning on your money (in a savings account or investment) compared to how much interest you are being charged on your current debt vs. how much interest you may be charged on a student loan.

6.Put savings in a 529 college savings plan (or Coverdell savings accounts) and consider shifting or contributing more to a siblings 529 account. Under the new FAFSA rules, only assets in a 529 with the parent as owner and the student as beneficiary will be considered parental assets. These assets are assessed at the maximum rate of 5.64% and distributions have no impact on financial aid eligibility.

7.Spend down the student’s assets and income first. If you have money in your child’s name that you can’t move away, it’s better to use your student’s assets first to pay for all college expenses. Then in subsequent years, parent assets will be assessed at the lower rate of 5.6% rather than 20%. (If you don’t qualify for any financial aid because your SAI is too high, it may be better to keep the money in your child’s name for tax purposes.)

8.Accelerate necessary expenses, to reduce available cash. For example, if you need a new car or computer, buy it before you file the FAFSA. (If you won’t qualify for financial aid because your EFC is too high, this may not apply. If you are considering purchasing a car, compare the cost of the car loan to a Parent PLUS Loan.)

9.Do not withdraw money from an IRA or 401k to pay for school. If you must use money from your retirement funds, borrow the money from the retirement fund instead of getting a distribution. (Different circumstances apply to Roth IRAs.)

10.Consider the possibility if  grandparents can help pay for college.  There are several approaches grandparents can take if they would like to help save and pay for college. The implications depend upon whether the student may be eligible for aid and what schools they choose to apply to. To be on the safe side, one option is for grandparents to contribute to a 529 plan that is in the parent’s name. Another option is for grandparents to create their own 529 plans with their grandchild as the beneficiary. Assets help in 529 plans that are not owned by the student or parent are assets that can be used to pay for college, but will not be considered as part of the student’s SAI calculation*.

Your  SAI will change each year because in addition to income and assets, it also examines a family’s demographic information, including family size, the age of the oldest parent, family structure (are parents married, separated, or divorced), the family’s tax filing status, and the student’s enrollment status.

Don’t wait till senior year to become informed about the financial aid process.  Pay it forward and tell parents of students in 10th grade or younger to get involved and start understanding these calculations, then they will have time to make their own informed decisions.


Use R2C Insights to help find merit aid and schools that fit the criteria most important to your student. You’ll not only save precious time, but your student will avoid the heartache of applying to schools they aren’t likely to get into or can’t afford to attend.  

Other Articles You Might Like:

Tips on FAFSA: Parents Share What They’ve Learned

How to Fill Out the New FAFSA to Get the Aid You Deserve

10 Reasons to Consider Smaller Schools with High Acceptance Rates

Colleges That Change Lives: The List of 44, Comparisons, and How to Choose




*These are just examples, consult a college financial planner to determine other strategies for grandparents that my apply to your situation.

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