When a student applies to college, his or her family is assigned an “expected family contribution” (EFC), based on income and assets. Assets held by parents enjoy more protection while assets held by children are expected to be used for college costs. The family fills out financial aid forms and an EFC is determined by a formula.
Say that your EFC is set at $20,000 this year. If your child is accepted at a college where total costs are $15,000, no needs-based aid will be offered. However, if your child goes to a college where costs are $25,000, you would be eligible for $5,000 worth of aid (loans, jobs, grants).
Therefore, the more expensive the colleges to which your student applies, the more likely you’ll qualify for needs-based aid. That’s especially true for years when you’ll have two or three kids in college.
If you think you’ll qualify for need-based aid, keep financial assets in your own name. Load up on investments that won’t be counted, such as life insurance, annuities, and tax-deferred retirement plans.