<p>My mom and I are currently working on the FASFA for college. I'm the first one in my family to go to college, so this FASFA stuff is something new for us. We haven't ran into any problems, but I'm just curious if there is any thing I should know that can help me out, perhaps get me some more money?</p>
<p>Thanks</p>
<p>There are no secret tricks to get more money. Most of the required information is straightforward and should match tax returns. One of the best things to do is to file as early as possible in order to ensure that you get your fair share of the money available. Late filers may not be as lucky. So, try to locate all the necessary information and ask your parents to file their tax return as soon as feasible or to get the best estimate they can.</p>
<p>That's what my mom was told to "the earlier you turn it in, the better off you are". So does turning it in earlier, mean I have a higher chance of getting more money, then someone who turns it in later?</p>
<p>The quicker you apply, the better your chances are to get close to the mamximum percentage of funding at your school. Some of the available funding runs out as it is on a first-come first-served basis. For all practical purposes, your FAFSA form should be completed ASAP, even using guesstimates.</p>
<p>King:</p>
<p>Another "trick" is that consumer debt is not considered whilst assets are, so if you have $20,000 in the bank and a $20,000 car loan or credit card debt, you would be better off, from a FAFSA perspective, to pay off the car.</p>
<p>The problem is that your financial aid may not be what you hope and you should not risk divesting yourself of all liquid assets and then not having money available for your EFC.</p>
<p>The places where it seems to matter are borderline cases, people who would qualify for a particular grant if their assets are low enough, but who do not if the asset is a bit higher. When your situation is on the threshold, you might benefit from a small asset allocation.</p>
<p>OK, I will give you some REAL tricks.</p>
<ol>
<li><p>The FASFA is based on a point in time. Thus, the assets in either your or your kids name as of the time you fill out the FASFA is what you put down. The problem is that any assets in the kid's name counts heavily against you in the formula much more than assets in your name. Thus, you cash out all assets in the kids name one day before you fill out the FASFA. You would then send in the form, and give the kid back the money. As far as FASFA is concerned,nothing is in their name as of the date of signing of the FASFA.</p></li>
<li><p>The second trick will work for both your assets and that of your kids. Not all assets are included in the FASFA. For example, cash value insurance and annuities are not considered assets. Again,before you file the FASFA, you get most liquid assets out of your name and/or kid's name and invest these proceeds in insurance cash value or insurance annuities. None of these investment will count against you on the FASFA form as an asset.</p></li>
<li><p>This one may not be applicable to you, but if it applies, it can be a huge saving. If you have a kid that decides to spend any time in the military, the parent's earnings and assets are not counted on the FASFA. This is one advantage of joining the military for a period of time.</p></li>
</ol>
<p>most colleges require you to fill out the fafsa to be eligible for aid from that college. Most of them also require you to fill out secondary forms that flesh out the real state of your income. The Fafsa as used by the Federal Goverment provides very limited aid, mostly to those with incomes under $40,000. If you have to use tricks and accounting schemes to mask your income you probably have too much anyway to get anything from the Federal gvernment. If you have significant income and want to legally adjust its distribution for aid or tax purposes you should probably see a qualified fin advisor, in fact you should do this around your sophomore year in high school.</p>
<p>One more trick: ALWAYS fill out a FASFA regardless of assets and income. Yes,, you may not get need based aid; however, in order to get any merit aid, you must file a FASFA for most schools!</p>
<p>While you "can" take money out of one account and put it into another...or stuff your mattress...the day you file your FAFSA, the reality is that hiding these assets in this way is fraud. If you had/have money in bank accounts, this WILL be reflected on the tax returns you have to send to the colleges (some require this, and sometime even if not required you will be selected for verification) in the form of interest the accounts earned. The bottom line is that you can use these assets to purchase things (like the example given above...car, student computer, house payments) but moving them out of the accounts on Feb 1 and filing Fafsa, then putting the money back IN the account on Feb 2 is not ok. Sorry Taxguy...but I do not agree with you on this one. This is simply "gaming the system". Need based finaid is designed for students who do not have the funds to finance college, not for students whose families hide the monies in the way you describe. The reality is that it does not matter where the money is (in the mattress or in the bank account) it is still an asset. Re: changing monies from student to parent name, most financial advisors clearly say this must be done at least TWO YEARS before filing for finaid. The best thing to do on the FAFSA is to be honest. Fill out the forms as the information on your tax return bank accounts state, and hope for the best. I DO agree with Taxguy that everyone should complete the finaid forms. If you have a circumstance during the school year that requires a review of your finaid (loss of income, serious medical expenses etc) you will NOT want to have to complete those forms and will be glad you have them on file.</p>
<p>Thumper speaks the truth....you should not game the system, but that does not mean you cannot correct errors made in earlier years. For example, don't take assets from your son one day and give them back the next, but if you have been saving YOUR parent $ in an account in your child's name, not knowing this is a bad thing for financial aid, I do not see that as unethical to use the money in legal ways and not have it available as an asset.</p>
<p>As stated above, it is smart to do this review by about 10th grade!</p>
<p>Excuse me,But what is 'gaming the system?" The FASFA notes that it is a point in time. Most lawyers are taught to find ways to legally work within the system. When lawyers come up with creative approaches to problems, are they gaming the system?</p>
<p>Insurance assets are not assets for financial aid. Why not take the kids assets and that of parents and transfer them to insurance assets. This is part of the FASFA rules.</p>
<p>Hi</p>
<p>Maybe a little too late for OP but an excellent book on this subject is Paying for College Without Going Broke by Kalman Chany (The Princeton Review). A new edition comes out every fall.</p>
<p>We try to read it once a year.</p>
<p>What I meant by gaming the system was the possibility of moving something out of the kids name and then back into their bame. Sorry if I misread your posting!! Transferring to cash value life insurance and/or IRAs and/or annuities are all great options...if it helps.</p>
<p>I know of one person who made a huge effort to minimize assets, never realising his $100k+ income would be the figure on which aid was most strongly based, then he found himself cash poor when it was time to come up with the EFC. On the other hand, another friend who was in an "economic downturn" and had income below $50k lowered his countable assets by paying off a car and was able to obtain more aid that way.</p>
<p>Taxguy- sorry if I misread what you meant! I was trying to point out there are plenty of legal and ethical ways to move $ around, no one needs to stuff it in a mattress (which should stull count as an asset!)</p>
<p>
[quote]
ALWAYS fill out a FASFA regardless of assets and income. Yes,, you may not get need based aid; however, in order to get any merit aid, you must file a FASFA for most schools!
[/quote]
</p>
<p>We don't intend to file FAFSA. Like many other students, my d has already received merit aid awards from the schools she applied to; there was no mention of FAFSA. Does this mean that her schools just happen to be in that minority that don't require it? Actually, I haven't seen any college web sites that said that you have to file FAFSA to get the scholarships they list. Maybe they just assume we'll file? Or maybe there's possibly more merit to come if/when FAFSA is received? </p>
<p>I've seen this same statement before on CC and was confused then also. We don't want to have regrets about it later, knowing we were warned!</p>
<p>Well a friend of mine has a D who applied to college last year. They did not apply for financial aid, partially b/c they felt that they would not receive any, and also b/c they felt that their D would be accepted to better schools, not knowing their finances. They thought they would be better off leaving the schools in the dark as to how much merit aid to award to get her to attend. They also received merit aid at some schools, but not at others. Nobody knows if they had filled out the fafsa, if she would have gotten merit aid at her other schools, or a different merit award at some schools. They are in a position to pay the full freight, and even though the D is a good student she did not stand out in the college she chose, and the parents are paying full freight. They can do it, but not without a lot of belt tightening. She did not want to attend the schools that offered merit aid ( at least 5 schools and at least 10,000 each). She also did not want a public university. Her parents went along with their daughter's wishes.</p>
<p>Taxguy, your advice in post 6 to cash out kid's assets one day, fill out the form, and then give the kid back the money is FRAUD. Whether or not you ever get caught for that crime, it is a hell of a bad example to set for your kid. </p>
<p>There is nothing to preclude you from legitimately spending down your kid's assets -- for example, maybe your kid could use a car and a laptop computer. If your kid has $10,000 in the bank -- have him buy the car and computer now. If next June you want to give the kid a high school graduation gift that happens to be just enough to cover the cost of the car and the computer... fine. Kid bought stuff, later you gave a gift. As long as your gift to your kid is under $11k, it isn't taxable and you are fine.</p>
<p>But please don't advise people to lie or cheat when it comes to financial matters. According to today's news, former Enron exec Richard Causey is going to be serving 7 years in prison for that kind of shenanigans.</p>
<p>Lighten up people!
If you don't want to take the advice, don't.</p>
<p>For all those considering hiding assets, I would like to just reiterate that it is considered fraud. It even says that when you fill it out. Something like you can be find x amount of dollars and/or imprisoned for however many years if this information is found to be untrue. So, it's just not worth it.</p>
<p>Calmom notes, "Taxguy, your advice in post 6 to cash out kid's assets one day, fill out the form, and then give the kid back the money is FRAUD. Whether or not you ever get caught for that crime, it is a hell of a bad example to set for your kid. "</p>
<p>Response: I am a tax lawyer by trade. I look for loopholes and things that are apparantly legal within the framework of the regulations, instructions, and other pertinent information. My reading of the FASFA instructions and their rules is that the FASFA must be done truthfully based on THE POINT IN TIME OF THE PREPARATION AND FILING OF THE FASFA. If you don't like my advice, as Mishdoob1 notes, don't take it!It is certainly your prerogative. However, based on the FASFA instructions, what I have advocated is perfectly legal. In fact, I specifically asked a lecturer on financial aid if my reading of the FASFA form is correct. They acknowledged that I am right although they too didn't like the suggestion for "moral" reasons.</p>
<p>Understand, my job is NOT to make moral judgments but to give people legal options based on planning. </p>
<p>I should note that even if you could reduce the "assets" located in a parent's or kid's name, you still have the income threshhold problem to deal with. Too much income could kill any aid just as well as too many assets.</p>
<p>Also, Calmom, I did not do this with my children because my wife didn't want to bother with this, and because of the income problem. Generally, if you make over 100K a year of AGI, unless you have some kids in college, you won't be getting much need based aid. However, if someone's circumstances are right ( makes less than 100K) and has too many assets in the kid's name, my suggestion, and it is a suggestion only, should work.</p>
<p>TaxGuy's method is workable. I think that "asset shifting or allocation" is a much better desciption than "cashout." Buying a car, computer, clothes, paying off debt, acquiring debt, and even buying insurance/annuities are all forms of asset shifting. </p>
<p>Many highly paid people have contracts with high value CV insurance that protects all parties and allows for the client to take over the payments when the client leaves the company, while at the same time reduces tax liability. This is just another form of deferred compensation. CVI and annuities are also widely used for expected inheritance taxes, typically for wealthy older citizen's inheritors. </p>
<p>Using CV insurance to shield assets should be done carefully and knowledgeably. In some ways I think that examining CVI and annuities is a result of either poor planning or unexpected wealth. Since most of us are not wealthy, planning is of lessor concern (this is simplistic for brevity). </p>
<p>The last 4 years when we had a falling interest environment, qualifing for UNsubsidized Stafford and PLUS loans and then consolidating, has been to the clients advantage. Come July 2006, the cost numbers for student loans will dramatically shift higher thus, Qualifing for subsidized status may be potentially be your advantage. </p>
<p>I looked at the problem 4 years ago as a mathematical-economic problem. I manage our and kid's assets by managing the assets. CVI and annuities is a form of asset not recognized in FAFSA but recognized in the Collegeboard asset, PROFILE, evaluation.</p>
<p>Today I did a scenario for kid's 2006 taxes. How far are you along in planning?</p>
<p>My advice to you is to do FAFSA and your asset evaluation in kid's 10th grade, so that you can do some planning.</p>
<p>Disclaimer: Be sure that you and advisor understand how asset shifting works. A lack of understanding or A goof, could cost you a lot of $$$$$$$$$.</p>