Episode 75: Is This Cheating the FAFSA? – Tips and Tricks for College Financial Aid

paying for college secrets

Join our Big Picture Retirement Facebook group, to join in the conversation with Devin, John, and other listeners.

It’s high school graduation time! It’s exciting, but it can also be terrifying to think about how to pay for college. For a lot of folks, college is the goal, but the costs can be overwhelming. Students can come out of college with a shocking amount of student loans. If you’re a parent, or a grandparent, you’ve got to be thinking, “How do I keep these children from going into that hole?”

Well, first you have to fill out the Free Application for Federal Student Aid (FAFSA). This form is required for any type of federal aid, and essentially required for most other aid. There are also about 200 colleges that use the CSS Profile, which is a different form that asks different questions. They ask a whole bunch of questions about the assets and the income of both the parent and the child. These two forms are used to come up with your Expected Family Contribution (EFC) amount – how much the parents are expected to pay.

Then, they compare the amount of your EFC to the cost of the college to see if you need financial assistance. One problem with this system is that, depending on your situation, the EFC can include as much as 47% of your net income. Wow!

So, what kind of things do you need to know?

College Savings

Any money in the child’s name is going to be expected to go towards college. This includes 529 accounts. If you’re a grandparent, it’s better to keep a 529 in your name so it doesn’t count towards the student.

Now, distributions from that 529 account count as income to the student. Because the FAFSA uses asset and income from two years before, don’t use the 529 money for the first two years of school. If they finish school in 4 years, that 529 income never shows up on the FAFSA for that student.

Independent Students

If a child is considered independent for the FAFSA, their expected contribution will be very, very small. There are a couple of ways your child could be considered an independent student. They can be orphaned, emancipated, or under guardianship. The first option isn’t very desirable, the second one is difficult, but there are many situations where guardianship might make sense.

Blended Families

If the student has divorced parents, then who fills out the financial aid forms? John suggests that it is the parent who claims the child on their tax return. If one parent has lower income, it may benefit the family as a whole to have the lower income parent claim the child on their taxes.


  • Why it doesn’t matter whether the parents plan to help with the cost of college
  • When not going to college is a better option
  • People with more than a million dollars in student loans

Don’t forget to subscribe to the show, and leave a rating and a review!

Every few weeks, Devin and John answer reader questions during the show.  Send your questions to questions@bigpictureretirement.net.