Lowering Your EFC at the Last Minute

The first step in lowering your EFC is to determine whether or not it’s worth doing. How to do that? Determine if you’re a need-based aid candidate at any of the schools you are serious about. You can use the FAFSA 4caster to estimate your EFC; just remember to add back any retirement plan contributions to your income or you’ll be way off.

Next, check out whether the school funds need. You can find this, among other places, on US News & World Report’s college rankings site: select the college, then view Financial Aid Statistics to see what percent of students receive need-based aid. This will help you determine if the school is likely to fund your need through a grant or scholarship.

If both of those indicators point to “yes” then you can start to strategize about lowering your EFC. The options for the current FAFSA are somewhat limited, since 2015 (the base year) has come and gone. With the caveat that Just because it’s right for the FAFSA doesn’t make it right for your overall financial situation, here are some things you can still do:

  • On the income side, your biggest changeable add-back item is your tax liability. The best way to change that at this point is to change your IRA contribution from a traditional to a Roth IRA.  This will increase your tax liability for the year, which will cost you money, but it will also reduce your Available Income on the FAFSA.
  • If your student has a lot of money sitting around from a summer job, they can deposit up to $5,500 (or the amount they earned, if lower) into a Roth IRA. This will remove it from the asset calculation. (Remember, though, that if they end up withdrawing that money in the future to pay for school, they have to add the withdrawal to their income, and only $6,400 annually of student income is sheltered from the Available Income calculation.) They could also contribute the money to their 529 account, buy a computer, pay for applications, or spend that money in other ways now to bring the account balance down.
  • Pay your bills, make your IRA contribution, make any large purchases you’re planning, and do whatever else you can to lower your checking account balance before filing. True, assets don’t count as much as income. However, according to bank consulting firm Moebs Services, the average American family’s checking account balance is about $4,500. Bringing that balance down to $1,000 before filing would lower that family’s EFC by almost $200.

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