How Does Your Cash on Hand Affect the FAFSA?
How Does Your Cash on Hand Affect the FAFSA?
At the beginning of the year, before filling out the FAFSA, you might want to take a look at your cash on hand. Cash, savings, checking accounts are all considered liquid assets and the more you have of these, the less money your student will receive from federally funded financial aid. There are several ways to reduce these assets so that he or she is eligible for more aid.
You might consider paying a lot of money down toward your upcoming bills for the year or pay down your mortgage in one large equity payment. Can you pay your insurance for the year all in one lump sum at the beginning of the year? Can you put money towards your yearly utility bill in January? What about that home improvement that is coming up? You can pay cash for it and have empty pockets when your child files the FAFSA. Paying down a mortgage is always good business because the more you have invested in your home, the less your lender has of your home. Make sure to note on the check that the money is for paying down the principal in your home so that it won’t be applied to interest.
Since your student will be starting to school in the fall, take advantage of the after Christmas sales and stock up on the things he or she will need in the dorm room. Towels, linens, a computer, bookcase, lamps, and chairs might be needed. If they are, you will be lowering your cash on hand to start the year as well as meeting a need for your child as he or she begins school.
If you have been working on an investment for a while and it just can’t seem to bring income, this might be the perfect time to sell it and take a loss. This loss will adjust your income which will help you on the FAFSA with your son or daughter’s education. If you decide to do this, you must do it in the year preceding the year you want it to be a loss reported on the income tax form. Selling the investment may bring more cash on hand than you want (even though there may have been no profit). With that money, you can follow the above guidelines to reduce your liquid assets while providing for a great addition or repair to your home.
Filling out the FAFSA is for the student and the parent. As the parent, you will probably have more assets than does your student. You must seek ways to protect those assets and provide for a great college education for your child.