FAFSA Online Secret: Minimize Your Cash
Liquid assets on hand (cash, savings, checking accounts, etc.) are the enemy on the FAFSA. The more cash and cash equivalents you have on hand, the less aid you will be qualified for. Okay, so how do you dump cash quickly? There are a couple of strategies, some of which are more ethical and easier than others.
Strategy #1: Buy Stuff
You know that your child is going off to college. The time to buy them all their supplies - computers, books, etc. - is before filing your FAFSA, so that there's just flat out less cash on hand.
It's also a good time to make that home improvement you were thinking about last year.
Strategy #2: Pay a Lot at Once
If you can, and your financial circumstances allow, try to pay your bills for the upcoming year as early as possible, and take a massive cash hit. For example, my car insurance company will permit me to pay the entire year's policy at once (for doing so, they give me 5% off as a bonus), and in doing so the bill is taken care of for the year, but I have less on-hand cash.
If you're financially able to, and if the companies you do business with will allow you to, try to pay an annual bill in the beginning of the year. Then file your FAFSA with empty pockets.
Tip: If you have a mortgage, dump your cash into a huge payment towards your principal. This gets rid of cash as a liquid asset but keeps it in your name as equity in your home.
Strategy #3: Shifting Assets
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This is the controversial one, the one that is more grey. We're including it here to be thorough. Before you file your FAFSA, find a trustworthy relative or friend and gift them some your savings. There is a danger to this particular strategy:
Your friend/relative may not be as trustworthy as you think.
When it comes to grandparents, money saved by grandparents is invisible on the FAFSA until they make a payment towards the student's education - then it counts towards the parents' contribution. A better strategy is to get subsidized loans (like the Perkins Loan or Stafford Loan) and have the grandparents pay off the student loans when the student graduates.
Stick with strategies #1 and #2, but don't burn all your cash just yet. You'll need some of it for the next secret...