If you’re sending a child or children to college, needs-based financial aid may be vital. To increase your family’s eligibility, get your finances in order before filling out the standard forms.
You should spend cash (especially cash in the child’s name) for major purchases, such as the student’s computer or even a car. Subsequently, use any remaining assets held by the child to pay for the first year or two of college, which will help when renewing financial aid applications.
Cash gifts from grandparents or other relatives should wait until after graduation, when the money can pay down loans rather than limit financial aid. In the meantime, parents’ cash can be spent paying down credit card bills, car loans, and other debt or purchasing expensive items such as furniture.
If you’re planning to sell assets, do so at least two years before a child enters college so the capital gains won’t show up as income on the first financial aid form. The less cash and the lower income you report, the greater your financial aid may be.