I know that your child has barely started high school, and I know that his dorm move-in day is three whole years away. I know it might seem like the last thing you need to be thinking about right now is college, but this is not true.
Because of changes to the college financial aid application system made by President Obama on September 13th, 2015, you are about to begin one of the most important years of your entire financial life—on January 1st, 2016.
Here’s the best way I can explain it.
On October 1st, 2017, a photographer is going to show up at your house.
Not an actual photographer, but that’s a good way to think of it.
On October 1st, 2017, the federal government is going to show up and take a snapshot of your family finances. This snapshot will give the government a good picture of your family income and assets. This snapshot will then be shared with financial aid people at colleges and universities, so they can figure out how much money your kid will need from outside sources to help pay for college.
Parents, you need to think right now about what you’ll want to look like in this snapshot.
If the shutter goes “click” and you appear to have a nice high income and large amounts of assets—guess what. The college financial aid office people who decide how much free money your kid gets to help pay for college are going to say, “Well, this kid comes from a nice wealthy family! They can afford to write checks to cover the tuition here! We won’t have to give HIM much help!”
Parents of current 10th graders, on the day the snapshot is taken (which for you will be October 1st, 2017), you’ll want to make sure that the picture the government gets reflects reality.
If your family isn’t able to pay $40,000–$50,000 a year for college, you’ll want to be very very sure that the financial aid office staff understands that.
Parents, plan ahead now for what you’ll look like in this snapshot. Here’s your first step.
The first step is to understand that when the government shows up to take a snapshot of your family finances on October 1st, 2017, they will look closely at this specific period of time: January 1st, 2016 to December 31st, 2016.
(This was different in the past. President Obama changed the rules on how families apply for financial aid for college on September 13th, 2015. My blog post telling about this is here.)
Parents, understand the degree to which you can affect the content of this snapshot.
Parents, you have from today to December 31st, 2015 to plan to reduce your 2016 income and assets to whatever degree you can, so that your 2016 financial picture doesn’t accidentally make you look like you’re Bill Gates.
Here are a few ways that families sometimes reduce income and assets in order to affect the snapshot:
1. If you’re a two-income family, could one of you stop working, and instead put extra time and effort into helping the family live more frugally? According to this post by Kiplingers, “‘Every $10,000 increase in parent income (during 2016 in your situation) will cause about a $3,000 decrease in need-based financial aid,’ says Mark Kantrowitz, publisher of Edvisors.com, a college planning website.”
2. If you’re getting a big bonus at work, a nice hefty sales commission, a large profit from a stock sale, or a big insurance settlement—could you try to take that before December 31st, 2015 ? If you take it later, you’ll make yourself look far wealthier than you are when this particularly important snapshot is taken.
3. If you have the financial flexibility, could you try to live on less and hold a little less in reserve in savings—and stash as many extra dollars as you can away into retirement accounts before December 31st, 2015? Money hidden away in retirement accounts is out of the snapshot. No matter how much it is, it doesn’t affect financial aid eligibility one bit.
4. If your child has a large chunk of money sitting in an account in his or her own name, be aware of this. On October 1st, 2017, the government is going to use the FAFSA form to “take a photo” of all of the money sitting in accounts in your child’s name on that day. The first $5,900 in those accounts will be no problem—but money over that amount will reduce your child’s financial aid eligibility. If you child has a lot of money in his name right now (perhaps in UTMA or UGMA accounts?) ask your financial planning professional if it might be a good idea to transfer that money into a parent-owned 529 plan with the child named as beneficiary. 529 plans are a good idea.
And if your child earned a good amount of money in 2015? Even if that money has already been spent on movies and pizza, you as a parent can take the amount of money that your child earned this year and put that into a Roth IRA retirement account in your child’s name. (Schwab allows you to get started with as little as $100.) Doing this will effectively “hide” this money so that it won’t be seen when your child eventually applies for financial aid for college.
You only have a matter of months to do this, though. If you’re going to hide any money away in retirement funds so that you can get more financial aid for college, it has to be done by December 31st of your child’s sophomore year of high school.
(These are all big decisions. Run these ideas by your financial planner to be sure the actions you’re taking are best for your individual situation.)
Maximize your potential for getting the most financial aid possible.
The government doesn’t actually show up at your house with lights and cameras. Instead, the government takes this “snapshot” by asking you to fill out the FAFSA form. No matter how high or low you think your family income is, please fill out the FAFSA form every single year you have a kid in college the following fall—even if you make $200,000 a year. Every single year, millions of families leave money on the table because they mistakenly believe that their income must be too high for them to qualify for financial aid. Don’t make this mistake. Fill out the FAFSA every single year on the first day possible, so that your child can jump first in line for financial aid money. (Note, the first day you can fill out the FAFSA form for your current high school sophomore will be October 1st, 2017.)
The information in this article is critically important for parents of 10th graders, but millions of them around the U.S. don’t know about it.
Can you share this post with other parents of 10th graders you know right now?
Have you heard?
When you’re a parent, it feels great to know that you’re taking practical steps to set your kid up for successful college and career life.
For clear, step-by-step help getting your kids through college debt-free, don’t rely on a loose collection of blog posts. You’ll miss hundreds of details that way. Instead, get your copy of my book:
You can “Look Inside” the book on Amazon for free by going to:
(Tell your friends.)
You can see why financial planners and wealth managers love LAUNCH, here.
You can see the top 9 questions parents are asking me about LAUNCH, here.
Read just one chapter of LAUNCH every 1–3 months while your child’s in middle school and high school, and you’ll know every viable strategy for debt-free college at exactly the right time to implement it.
And if your child’s already well past middle school? That’s OK; you can run to catch up. But the process of getting your kids through college debt-free goes more smoothly the earlier you start it—especially if you’re not planning to save up any money to pay for college.
Are you a parent of a 10th grader? What steps are you taking to get maximum financial aid for college when the time comes?
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Who is Jeannie Burlowski?
Jeannie is a full-time academic strategist, author, speaker, and podcast host. Her writing, speaking, and podcasting help parents set their kids up to graduate college debt-free and move directly into careers they excel at and love. Her work has been featured in publications such as The Huffington Post, USA Today, NerdWallet, and US News and World Report, and on CBS News.