Financial Aid: Moves To Make This Year To Help You Get More in 2011

Earlier this week I received the following question: "I have to fill out the FAFSFA in March (for financial aid) for my son who is going to college this fall and wanted to know if there are any financial moves I should be considering to increase the federal aid he could receive..."

In my post earlier this week, I covered some financial moves you can make NOW that can help to increase the amount of financial aid you can get for your student THIS year.

But it can also pay to make a few financial moves in the calendar year BEFORE the year you submit the FAFSA. Essentially, this involves strategies that can reduce your income and includable assets. But doing this takes planning and foresight so you'll need to think and plan ahead, as making a few well-timed financial moves

Here are a few financial moves to consider THIS year that can help to decrease your expected family contribution and increase your student's eligibility for some federal financial aid programs NEXT year:

• Minimize Income. Be careful when selling investments in taxable accounts, since realized capital gains are included income. Avoid taking taxable withdrawals from retirement accounts and exercising stock options. Also, defer any bonus income until next year, if possible.
• Hold off on making gifts of money to the student. Ask family members to put off making monetary gifts directly to the student. Instead, make gifts after graduation, which the student can then use towards paying off student loans.
• Deplete student's assets first. If you feel that the student's assets should be used towards education costs (wasn't that the purpose of these savings in the first place?!), then use up all of his or her assets towards college costs this year, before using any of yours.
• Contribute to retirement accounts. Since assets in retirement accounts are not includable, making the maximum contributions to 401(k) accounts this year can reduce your savings outside of retirement accounts, which are includable assets.

For more information, here's my favorite article about financial planning and the FAFSA.
My favorite book on the subject is Don't Miss Out: The Ambitious Student's Guide to Financial Aid, by Anna Leider and Robert Leider. Ray Martin

View all articles by Ray Martin on CBS MoneyWatch»
Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.

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