<p>I have a small chunk of stock options from my company. When we filled out all the financial aid forms for my daughter's (HS 2010 - College 2014) 1st year, they didn't really affect the financial aid. This year however the stock price has more than doubled, causing our financial aid package to drop considerably. </p>
<p>Here's my dilemma - My son is a rising senior and he will be applying to colleges this fall. I've heard that I should not exercise any stock options during the year before a child goes to college. However if the schools count them as an asset, does it really matter if I exercise them this year or wait until January?</p>
<p>Hmmmm…I believe if you exercise the options, will this be considered INCOME vs ASSETS? You might want to check into that. A rise in your income could actually affect your aid in different ways than a rise in assets. Try running both sets of numbers through one of the online EFC calculators to see.</p>
<p>If your daughter’s and/or son’s schools don’t guarantee to meet full need, you may find this doesn’t really affect your aid at all…as the schools that don’t guarantee to meet full need won’t anyway.</p>
<p>Oops - the time to exercise stock options is the year BEFORE your base year or sooner (base year for your son would be the current year - the calendar year that includes 2nd half of the jr year and 1st half of the sr year of hs.) But, in your case if you did it in 2010 it would have messed up your daughter’s FA.</p>
<p>thumper is right - if you exercise non-qualified stock options in 2011, or any time before completing your final set of financial aid forms (spring of jr year of college if child is graduating on time), the difference between the exercise price and the market price on the day you exercise the options will count as INCOME on your tax return for that year. Income is assessed at 47% by the FAFSA (and approximately the same for the CSS profile), but assets are assessed at only 5.6% (after the asset protection allowance has been subtracted out)</p>