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My daughter will be applying to colleges in 1 year.

Where should I keep my money to optimize my college financial aid eligibility? (parent-plus loans? something else?)

E.g., should I keep as much as possible in cash-equivalents? Pay down the mortgage? IRA?

  • Can you clarify what you mean by "financial aid eligibility"? – TTT Sep 26 '16 at 22:01
  • @TTT: parent-plus loans or whatever else there exists – sds Sep 26 '16 at 22:04
  • The way you ask your question makes it seem like you believe that a parent-plus loan is an investment. Please clarify your thoughts. – Pete B. Sep 27 '16 at 13:33
  • For some reason when I read this question, I feel like you are asking how to hide your money so your child qualifies for financial aid. If I am wrong, my apologies - it was my arse talking. – NuWin Sep 28 '16 at 7:00
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There is no simple answer to your question. It depends on many things, perhaps most notably what college your daughter ends up going to and what kind of aid you hope to receive.

Your daughter will probably fill out the FAFSA as part of her financial aid application. Here is one discussion of what parental assets "count" towards the Expected Family Contribution on the FAFSA. You can find many similar pages by googling. Retirement accounts and primary residence are notable categories that do not count. So, if you were looking to reduce your "apparent" assets for aid purposes, dumping money into your mortgage or retirement account is a possibility.

However, you should be cautious when doing this type of gaming, because it's not always clear exactly how it will affect financial aid. For one thing, "financial aid" includes both grants and loans. Everyone wants grants, but sometimes increasing your "eligibility" may just make you (or your daughter) eligible for larger loans, which may not be so great.

Also, each college has its own system for allocating financial aid. Individual schools may ask for more detailed information (such as the CSS Profile). So strategies for minimizing your apparent assets that work for one school may not work for others. Some elite schools with large endowments have generous aid policies that allow even families with sizable incomes to pay little or nothing (e.g., Stanford waives tuition for most families with incomes under $125,000).

You should probably research the financial aid policies of schools your daughter is interested in. It can be helpful to talk to financial aid advisors at colleges, as well as high school counselors, not to mention general financial advisors if you really want to start getting technical about what assets to move around. Needless to say, it all begins with talking with your daughter about her thoughts on where to go.

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