Thursday, 3 November 2011

Five FAFSA Factors That Will Affect Your EFC And Your Financial Aid

As you look at the FAFSA or Free Application for Federal Student Aid, it can be very helpful to understand some of the different factors that can and will affect how the federal government determines your EFC or Expected Family Contribution. Here you will find a brief overview of some of the more important factors and take a look at how they can influence your financial aid for better, or for worse.Factor One: Parent’s AgeWhy should the age of the parent’s have any bearing on financial aid? Because the older the parents, the less time they have to prepare for retirement. So the older they are, the lower their EFC will be if all other factors were equal. This can also mean more financial aid.Factor Two: Parent’s Marital StatusDivorced or separated parents may have a lower EFC if the student lives with the parent that has a lower taxable income at the time of filing the FAFSA. This can be a very strategic move for some families when they begin looking at the best way to qualify for financial aid and pay for college.Factor Three: Number of Family Members in SchoolIf there are more than one family member in school at the same time, the family EFC can be significantly less, which will help to provide more financial aid. Being a student can also mean one of the parents that is back in school. If this is the case or even a consideration, you may want to explore this further to see how much it can reduce your overall EFC and save.Factor Four: Includable AssetsThere are very specific categories of assets that have to be included on your FAFSA and these assets will have a negative impact on your EFC calculation. The key to reducing your EFC and increasing your financial aid is to find the areas that you can control and reduce these includable assets by shifting them into non-includable areas.Factor Five: Parent’s Adjusted Gross IncomeFor most families today, there are ways to reduce your adjusted gross income (AGI), if you know what they are and have the means and desire to take advantage of them. If you reduce your AGI by just $5,000, it can have substantial impact on your EFC. I have personally found ways to reduce my own family AGI by much more than that annually and this has had a very nice impact on our financial aid. Most families have some ability to do the same, but haven’t, and this can be a very costly mistake.Summary: As you can see, there are lot of factors that can work in your favor or work against you when it comes to financial aid.

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