Lower the EFC on the FAFSA!

How to Lower your EFC on the FAFSA and Get More Financial Aid

If you’re applying for financial aid with the FAFSA, there are two basic numbers that go into the equation.

First, there’s the cost of schooling – that includes tuition, room, board, textbooks, and other supplies.

Then comes your expected family contribution (EFC) – the amount of money an institution believes you have available to pay for schooling. Don’t be surprised if that number assumes rather austere living for the rest of the family.

Your FAFSA’s financial aid eligibility is basically the cost of school minus your EFC. As there’s no way to change the cost of the school – you’ve got to concentrate on ways to reduce your expected family contribution. Here are a number of perfectly legitimate ways to reduce your expected contribution – without doing anything untoward.

Reducing Your Expected Family Contribution

  • Don’t lie on the FAFSA. There is always a temptation to fudge the numbers. Don’t do it. If you get caught, you’re in for a world of hurt. The government could impose fines and up to 5 years of jail time, you could be required to pay back moneys received – and, worst of all, you may be declared ineligible for any aid going forward. It’s just not worth it.
  • Time your application carefully. Be entirely truthful – but be smart. Everything you enter on your FAFSA form has to be accurate for the date you submit. That means, if you’ve got a raise coming up or a financial windfall in your future, make sure you get the application in beforehand. If your child is planning to get a job to help pay for education – get the FAFSA in first!
  • Spend your child’s money first. The actual student is expected to pay the highest percentage of income and assets – reduce these first. Then come parents, and finally any other sources (like grandparents). Spend down assets accordingly.
  • Avoid capital gains and other forms of income. Income counts much more than assets when calculating EFC. That means keep your stocks in stocks – at least until your application is complete. If you sell your stocks and take gains, that will hurt much more than leaving them alone as assets (the opposite is true for losses).
  • Delay gifts. If a grandparent is planning to help contribute – hold off. Make it a graduation gift.
  • Pay off debts. Credit card debts, auto loans – these things don’t count against your assets when calculating the EFC. If you spend the money to pay them off, though, then you’ve erased that from your assets.
  • Minimize withdrawals. While 401(k) assets don’t count against you – if you withdraw from them to help pay for college, they do. Plus, you’ll be paying hefty penalties. A bad idea all around.
  • Accelerate any necessary purchases. If your family needs a new computer – get it before you submit your FAFSA. Same for a new car, or any other expenses. The smaller you can make your assets, the better. Don’t spend wildly – just move purchases up.
  • Have more than one child in college. By maximizing your expected college costs, you will receive more financial aid for each.

These are all entirely legal ways to help maximize the aid you get. Practice them all, and you’ve got a much better shot at receiving adequate financial aid.

Until next time,

Want to get the most financial aide as you fill out the FAFSA? There’s just two main figures that go into the equation.

1. The actual cost of the schooling. Get that by adding up the tuition, room and board and the textbooks and other supplies.

2. The next figure is your Expected Family Contribution (EFC)  –  the amount of money an institution  believes you have available to pay for school. This evaluation is based on an assumption of some very thrifty living for the rest of the family!

The conclusion of what your eligibility is for financial aid is the total cost of school minus your EFC. There is any actual way for you to change the actual cost of the school. You have to focus on different methods to legally reduce your EFC. And, here are some perfectly legitimate ways to do that!

How to Reduce Your Expected Family Contribution

  • Tell no lies. Not even any little ones.  The temptation is there, but don’t give into it. Do it and get caught and you’re in big trouble.   The government has the option to impose fines and even give you up to five years in jail. You’ll be required to pay back any monies actually received. And it might be that you’ll be ineligible for any further aid ever. Not worth it at all.
  • Timing is very important.  You need to be entirely truthful, as you’re being very smart!  All the information you enter on your FAFSA form must be completely true – for the date of your submission!   And that’s pretty key. So, if you know you’ve got a raise coming out, or inheritance coming in, or some other financial windfall, submit your FAFSA before it comes in. Also, if your child is planning on working to assist expenses, get the application in before the job is begun.  Get the basic idea?
  •  If your child has money, spend it first.  The applying student is expected to pay the biggest part of income and assets, so bring these down beforehand. After the student comes the parents. And then, finally any other sources (such as grandparents). So, spend down your assets accordingly.
  •  Be sure to submit your FAFSA before collecting capital gains or other forms of income.  When your income is being calculated, your  income will be a more important factor in your  calculation. Much more than assets.   So, don’t cash in your stocks – wait until your application is complete and submitted. Should you sell your stocks and take gains, your EFC will go up.
  • Postpone gifts. Is Grandma planning to help?  Thank her and ask her to hold off. Have her give it at graduation.
  • Pay off your Credit Card and Auto loan debts. Although these don’t count against your in the EFC calculation, should you  spend the money to pay them off, you’ve minused some assets  in the equation, reducing your EFC.
  • Don’t withdraw from your 401(k). When not withdrawn, these assets don’t count against you – but, as soon as you withdraw from them to help pay for college, they do. Not to mention,  you’ll be paying big penalties.  Not a good idea.
  • Accelerate any necessary purchases. Your family needs a new computer,  washer dryer or car?  Buy them before you submit your FAFSA. Or any other expenses. The objective is to make the value of your assets smaller. For this equation, the less your assets, the better. Of course, don’t spend wildly. It’s just that if you know purchases are soon to be made, go ahead and make them before the FAFSA application.
  • If there is another child eligible, have more than one child in college. By maximizing your expected college costs, you will receive more financial aid for each.

These ways are all entirely legal to help you maximize the aid you get. Put them all in effect and get more aid.

Leave a Reply