<p>Is it a legitimate choice to pre-pay tuition as a way to decrease "cash on hand" when filing the FAFSA/Profile, since that's what that money is for anyway?</p>
<p>Thanks.</p>
<p>It will decrease cash on hand, but it may cause you to also have less money. Instead of prepaying, if you put the money in a savings account, it would make interest and be worth more. As to whether you increased value is more than the decreased FAFSA-determined amount, I don’t know.</p>
<p>beolein - Really, if you know of a savings account that’s currently paying more than 5.64% interest, please let us know! And of course, that additional income will also be assessed in calculating FA eligibility . . .</p>
<p>Consider paying the student’s rent/housing for the remainder of the school year as well. Off campus leases in our college town go through August 15th, so paying rent through the end of the lease is another way to decrease cash on hand, especially since it IS part of the COA for 2012-2013.</p>
<p>If you have a Roth IRA where you have met the 5-year holding period, put the money there. It is still listed as an asset on the Profile, but it is a retirement asset so it won’t be listed on FAFSA.</p>
<p>Because you have met the holding period, distributions used to pay higher education expenses are quailified distributions not subject to the early withdrawal penalty, and because it is a Roth account, you already paid the taxes whent he money was earned.</p>
<p>Note that this doesn’t work if you don’t already have a Roth account where you have met the holding period. (hint to those with younger kids - open a Roth account now with your first contribution - once you meet the holding period with those funds, all contributions are treated as meeting the holding period!)</p>
<p>I guess you can do it, but you do know that you may not get the money back intact if a change of mind or circumstances occurs and your kid ends up not going to the school. Also the school might have some problems cashing that check before they have an account set up for the student and the $s have to be out of your account on the day you file FAFSA,not in a check waiting to be cashed. </p>
<p>It happens more time than you would think that a kid ends up elsewhere for any number of reasons, by the way. Besides, how much money are you talking about? 5.6% of $60K is about $4k and that is a max in terms of payment.</p>
<p>CTScoutmom, not sure if that is such a great idea, parking that money in the Roth, unless it’s going to stay there, because withdrawing it while the kid is in college is going to count as income on the FAFSA and other forms, which will be even a bigger whammy than being hit up with it as an asset.</p>
<p>Thanks all for the replies. </p>
<p>My purpose is to reduce the asset, not to have it in savings (of any kind).</p>