Many middle class and upper middle class families, income is fixed, savings are limited and college financial aid is hard to come by. The good news is that if you learn how to reduce EFC (Expected Family Contribution) as soon as you can get for significantly more financial aid. Here’s how to do it.
When you file your FAFSA every year, college and the Federal Government will use the information to calculate the Expected Family contribution of financial aid purposes. After they have these figures, the colleges will then use their own financial formulas and then provide you with a prize student packages.
With some careful planning meeting every year, you can actually reduce the EFC and increase financial phone. support, sometimes by thousands of dollars per year
Six Ways to Cut Your EFC
1. Saving the student One important factor that can increase the EFC is to have too much savings in the student’s name. Approximately 20% of all savings or investments that are held in the name of the student in family your contribution in that year. By keeping savings out of the name of the student, it will reduce your EFC.
2. Savings parent and investment There are many types of savings and investments that college is among the FAFSA and the EFC calculation. The key is to find ways to save and invest in those areas that are exempt from college financial aid. If you’re using non-qualified savings, mutual funds, stocks or bonds for the purpose of accumulation, this must be included in the financial figures help. You need to find other ways for these savings and investments in order to reduce includable assets.
3. Taxable income parent: If you are not already looking for ways to reduce your taxable income, you need to start. The lower your taxable income, the better your chances to get more financial aid. This may include the use of tax-deductible savings programs like IRA’s, 401K’s, HSA and more. It can also involve better use of itemized deductions like charitable non-cash expenses, employee business expenses and union dues to name a few.
4. Small Business or Farm Assets: For those who own a small business, consulting, side business or family farm, you have several opportunities to shelter assets and reduce your EFC. Assets held inside your business or farm are not included in the financial aid calculations for most colleges. So if you have working capital in the business, leave it where it is needed.
5. Voluntary retirement savings By utilizing voluntary retirement savings plan, you can reduce EFC in two ways. First, it will reduce your taxable income. Second, these retirement assets are not in financial aid purposes. So by seeing the first retirement, you can actually help the financial situation.
6. Insurance and pension Values: Another area that is exempt from financial aid calculations in most schools is cash and surrender value of life insurance and annuity contracts. These values are tax deferred and generally used for death benefits and retirement income purposes that allows them to bypass financial assistance. Be careful with this area and there are many restrictions on these assets as well
Summary :. So there are six ways to reduce your family contribution for college purposes. If you make a concerted effort to organize income and savings plans every year, you can save hundreds, even thousands of dollars annually. These measures will also help you save on your taxes and help plan for your retirement while keeping student loans child as low as possible. Sounds like another “win-win situation.
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