1. I MAKE TOO MUCH MONEY

Income is only one factor in determining your Expected Family Contributions (EFC).  Other factors such as the age of the parents, the number of dependents and the number of children in college affect your EFC.  If you have a six-figure income and your child is attending your state university, chances are you may not qualify for aid. However, if your child is looking at Northeastern, Hofstra or an Ivy League school with tuition over $45,000, you may have a need that the college can fill.  If you have more than one child in college at the same time, thereby doubling your expenses, a six-figure income may not be adequate.  It is interesting to note that the vast majority of all aid applicants receive financial aid in some form – even those with high incomes.  The primary reason families do not get aid is simply because they fail to apply.

2. I’ll PUT RESOURCES IN MY CHILD’S NAME

That might make sense for income tax purposes, but not for qualifying for college financial aid.  The biggest mistake families make when planning for college is having money in the student’s name.  The problem is that 20% of a student’s assets are assessed in the context of the financial aid formula when determining the families Expected Family Contribution (EFC), while a maximum of only 5.65% of the parents’ assets are assessed.  The resulting increased assessment at the student rate would certainly negate any tax savings.

Asset Contributions
Parent’s	Student’s
$10,000 x 5.65% $565 assessment	$10,000 x 20% $2,000 assessment

In the above example, having money in the student’s name results in a nearly $1,435 reduction in potential financial aid – a significant loss when you multiply that over four years.  The net result is you are potentially missing out on $5,740 of college aid!

3. TRUSTS

Parents and grandparents often set up education trusts for children under the mistaken assumption that the colleges will not be able to include these trust funds when determining need.  Financial aid applications require you to disclose trusts.  It is assumed that the entire amount in a trust is available to be used even if the trust has been set up so that the principal can not be touched.  Because a trust is considered the student’s asset, the entire current value of the trust is assessed at a 20% rate even though the student cannot access the trust. This occurs every year you apply for aid. In most cases, putting money in trust will result in a family paying more for an education than if they had been allowed to spend this money directly on tuition thereby being eligible for more aid.

4. LEAVE INFO OFF FAFSA

All schools must verify the financial information of at least 1/3 of the students to whom they provide aid, and many do 100% verification.  If your application is chosen for verification, you will be required to provide the Financial Aid Office with copies of all relevant documents.  The state aid organization and/or U.S. Dept. of Education may also require verification. If you can not provide records, you will not receive aid.  If you receive aid based on incorrect information, you will be required to pay it back and possibly pay fines or additional fees. If you submit a fraudulent application you are subject to a $10,000 fine, prison or both.

5. BORROW MONEY

All federal loan programs have specific borrowing limits. With these caps in place, it is highly unlikely that your child will be able to borrow enough to cover the full cost of tuition.

Loan Type	Annual Limits	Borrower	Lifetime Limits	Need Based	Interest Treatment While Enrolled
Perkins	$5,500	Student	$27,500	Yes	None accrues
Subsidized Stafford	$3,500 year 1 $4,500 year 2 $5,500 year 3	Student	$31,000	Yes	Not charged
Unsubsidized Stafford		Student		No	Charged, but can be deferred
Federal PLUS		Parent	N/A	No	Payment begins 60 days after loan disbursement
	Cost of education minus any aid awarded

Many different loan programs are available, but they fall into two main categories; Need-based loans, as the name implies, go to students displaying the greatest need and Non-need-based loans which are available for virtually everyone completing a FAFSA form. The need-based loan programs offer lower rates, reduced fees and better terms than the non-need-based loan programs.

6. Independent Child

Qualifying for independent status is not as simple as not claiming your child on your tax return. For federal financial aid purposes, a student must meet one of the following to be considered independent:

• For the 2009-2010 school year, the student must have been born before 1/1/86.
• The student is a U.S. Armed Forces veteran.
• The student is a ward of the court or both parents are deceased.
• The student is married as of the day they apply.
• The student is a graduate or professional student.
• The student has legal dependents (other than a spouse) and is providing at least half their support.
• The student has children who receive more than half their support from them.