In an earlier post, we discussed how schools determine aid eligibility based on your expected family contribution (EFC). Your EFC is based on a combination of income and assets that belong the student and, typically, her parents. Your chosen college’s financial aid office, along with the federal government, throws all this information into a calculation called the the federal methodology to arrive at your individual EFC. the higher your EFC (or the closer it is to the estimated cost of attending your college), the less eligible you are for federal financial aid. Here, we’re going to take a look at some ways that you can legally lower your EFC, apart from being declared an independent student, and thus increase your eligibility for aid.
One of the criteria that has the most effect on your EFC is your income both before and during your college years. This doesn’t mean that you should immediately quit your job and throw yourself on the couch with the remote and a bucket of ice cream as you wait for the Pell Grant check to clear. Not at all. In fact, please don’t. But what you do need to do is remember that in the eyes of the financial aid powers, a percentage of what you are earning is expected to be used for college. So, yes, you could lower your income in order to be more eligible for aid, but you would be shooting yourself in the financial foot. It would be frankly silly to earn $5,000 less per year so that you could qualify for an extra $1,000 in federal student aid. Right?
The better (less fun, more prudent) course of action is to save as much of what you earn as you can for use in paying your college expenses. If your income is going to count against your EFC, which it will if you need federal aid, you need to allocate as much of it as you can toward paying for college. From the frugal perspective, this strategy has the added benefit of reducing the amount of outside aid you will actually need, most particularly loans. Which, in the long run, is financially way better. So, if you use what you earn to by less pizza while you’re in college, you will be able to buy a lot more of it (and other things) with your post-degree job and reduced student debt lifestyle.
Trust Your Parents
Another way to reduce your EFC is to transfer some of the assets that you own in your name to your parents. The only things you need to worry about are the types of assets that will be included in the federal methodology calculation, such as savings accounts and accounts of which you are the beneficiary, like 529 savings plans, etc. If you choose to look into this way of increasing your eligibility for federal student aid, be sure to talk to a financial adviser to make sure that it is a permissible transfer. You will also want to make sure that you change the ownership long before you submit your first Free Application for Federal Student Aid (FAFSA) so that there is no question of who is legal owner of the assets.