How to Maximize Your FAFSA Financial Aid: Updated Guide to Increasing Eligibility

Q: How can I maximize my financial aid eligibility from FAFSA without doing anything shady or illegal?

There are no secret tricks for “getting more FAFSA money,” but there are smart, legal ways to make sure you are not leaving financial aid on the table. The key is understanding how today’s federal financial aid system works and making thoughtful choices about income, assets, and timing before you file the FAFSA.

Federal aid is now based on the Student Aid Index (SAI), which replaces the old Expected Family Contribution (EFC). Your SAI is calculated using information from your tax return, your family size, and certain assets, and schools use it to determine how much need-based aid you may receive.

How Federal Financial Aid Is Calculated Today

When you submit the FAFSA, your information is used to calculate your Student Aid Index. In general, these factors have the biggest impact:

• Parent income: For dependent students, this is usually the single most important factor.
• Student income: Student earnings over certain allowances can increase the SAI.
• Family size and number in college: A larger family size can reduce the SAI; the way “number in college” is treated has changed from the old formula and is now less generous.
• Parent assets: Savings, investments, and other non-retirement assets may be counted, but at a relatively low percentage.
• Student assets: Money and investments in the student’s name are usually weighted more heavily than parent assets.

You cannot change your basic family situation, but you can control how and when income and assets show up on the FAFSA, and you can take advantage of rules that protect certain savings and retirement funds.

What You Can and Cannot Control

You cannot control:

• Your basic family size or how the federal formula is written
• The fact that income will always matter more than small changes in assets
• How much federal funding Congress allocates for aid programs

You can influence:

For a full walkthrough of the FAFSA form, timelines, and what to expect, see our step-by-step overview on FAFSA and Financial Aid.

• Which year’s income shows up on your FAFSA (by timing certain financial moves)
• Whether savings sit in the student’s name or the parent’s name
• How early you file and whether you meet state and college deadlines
• Whether you ask for a professional judgment review if your situation changes

The strategies below focus on steps that are both ethical and effective under current FAFSA rules.

Strategy #1: File Early and Watch Every Deadline

Many families focus on the federal FAFSA deadline, but some of the most valuable aid comes from states and colleges, and those funds can run out.

• Submit the FAFSA as soon as it opens for the academic year you need aid.
• Check each college’s priority FAFSA deadline on its financial aid website.
• Look up your state’s FAFSA deadline for state grants and scholarships.

Filing early doesn’t change your SAI, but it can significantly improve your chances of receiving limited state and institutional funds before they are exhausted.

Strategy #2: Be Smart About Income in the FAFSA “Base Year”

The FAFSA uses tax information from an earlier “base year.” For example, the FAFSA for a given school year may use your tax return from two calendar years prior. That means decisions you make about income in that base year can affect your financial aid.

When possible, consider:

• Avoiding unnecessary taxable events in the base year, such as large one-time capital gains from selling investments purely by choice.
• Being cautious with actions that dramatically increase taxable income in a single year (for example, certain retirement account withdrawals).
• Keeping good records of any unusual, one-time income that you may later ask a financial aid office to review as a special circumstance.

It is important not to delay essential financial decisions just for aid purposes, but when you have flexibility, spreading income more evenly over multiple years can help avoid a spike that raises your SAI.

Strategy #3: Favor Parent Assets Over Student Assets

Under the FAFSA formula, parent assets generally have a smaller impact on aid eligibility than student assets. In practical terms, a dollar in the student’s name can hurt more than a dollar in the parent’s name when it comes to need-based aid.

To use this to your advantage:

• Avoid holding large amounts of college savings in custodial accounts that belong directly to the student.
• Whenever possible, keep long-term college savings in accounts treated as parent assets, such as a parent-owned 529 plan.
• If the student already has significant savings, consider using those funds first for legitimate educational or necessary expenses before filing the FAFSA.

The goal is not to hide money, but to place savings in the type of account that is treated more favorably by the aid formula.

How Different Assets Generally Affect FAFSA

Strategy #4: Use 529 Plans Wisely

529 college savings plans are one of the most FAFSA-friendly ways to save for education when held in the parent’s name for a dependent student. Under current rules, even grandparent-owned 529 distributions are treated more favorably than they were in the past.

• Parent-owned 529 plans: Counted as a parent asset, which is generally more favorable than being in the student’s name.
• Grandparent-owned 529 plans: Under the new FAFSA rules, qualified distributions are no longer reported as untaxed income to the student, which means they no longer reduce aid eligibility the way they used to.
• Other aid forms: Some colleges that use the CSS Profile may still ask about 529 accounts owned by grandparents or other relatives.

If grandparents want to help, they can often contribute to a 529 plan or use an existing one without the same financial aid penalty that applied under older rules. It is still wise to coordinate with the family and the college’s financial aid office if large distributions are planned.

Strategy #5: Spend the Student’s Money First (the Modern Way)

It can still make sense for the student to spend down their own savings before the parent’s, especially when the student has cash that is not needed for emergency funds.

• Use student savings for necessary education-related purchases (a computer, supplies, moving costs) before the FAFSA filing date.
• If the student has accumulated extra cash, consider using it for legitimate, planned expenses rather than letting it sit in an account that will be counted as a student asset.
• Keep records of how the money was used in case questions arise later.

This approach does not guarantee more aid, but it can reduce the amount of student assets counted against you when your SAI is calculated.

Strategy #6: Reduce High-Interest Debt Thoughtfully

Older financial aid advice often suggested paying off credit card debt with savings purely to reduce reportable assets. Today, assets usually have a smaller impact on aid than income, but reducing high-interest debt can still be helpful.

Before using savings to pay down debt, consider:

• Whether you will still have a reasonable emergency fund after the payment.
• How much interest you are paying on the debt compared with what your savings earns.
• Your overall budget and ability to avoid accumulating new debt.

Paying down expensive consumer debt can improve your financial health, and as a side effect, reducing cash on hand may have a modestly positive effect on aid eligibility.

Strategy #7: Ask for a Professional Judgment Review If Your Situation Changes

The FAFSA is a snapshot of your finances based on a specific tax year, but real life is messier. If your family’s financial situation has changed significantly since that tax year, you may be able to request a review from your college’s financial aid office.

Common reasons to request a professional judgment (sometimes called a special circumstances appeal) include:

• Job loss or significant reduction in work hours
• Major uninsured medical expenses
• Separation, divorce, or death of a parent or spouse
• One-time income events that do not reflect your ongoing ability to pay

Each school has its own process, but most will ask for a written explanation and documentation. While an appeal is not guaranteed to change your aid offer, it is often the only way to have recent changes in your finances considered.

Before You File: FAFSA Readiness Checklist

Use this quick checklist to make sure you are in the best possible position before you complete the FAFSA:

• Create FSA IDs for the student and each required contributor (such as a parent).
• Gather the required tax returns, W-2s, and records of untaxed income for the base year.
• Review your current savings and investments and understand which accounts will be reported.
• Consider whether student-owned savings can be used for necessary expenses before filing.
• Check each college’s FAFSA and CSS Profile (if required) deadlines.
• Talk with grandparents or other relatives about how and when they plan to help with college costs.
• Make a list of any special circumstances that might justify an appeal later.

Maximizing your financial aid eligibility is less about tricks and more about planning. Filing early, understanding how the SAI formula treats income and assets, placing savings in FAFSA-friendly accounts, using student funds wisely, and speaking up when your circumstances change can all help ensure you receive the aid you are truly eligible for. With a bit of preparation and clear communication, you can make the most of the financial aid system and reduce the overall cost of college as much as possible.