FAFSA student aid and 7 ways to pay for college

If you know much about college financing, you probably know the basics of improving a financial aid package: Save in your own name, rather than your child's, fill out the Free Application for Federal Student Aid (FAFSA student aid) as soon after Jan. 1 as possible and look for scholarships and other "free money" that can reduce your costs.

But many other strategies can also increase your financial aid. Here are seven of them:

 SEEK OUT GENEROUS SCHOOLS

Most colleges and universities do not provide enough scholarships, grants, loans and work-study to pay for all of their students' expenses. Some, however, are committed to filling 100 percent of those needs, and they are the colleges to seek out if you really want to reduce your costs, says Lynn O'Shaughnessy, author of the book "The College Solution" and website of the same name.

Typing a school's name into CollegeBoard's "College Search" function () will show you the percentage of student expenses the college meets and the average size of aid packages.

 SPEND DOWN STUDENT ASSETS

Before applying for financial aid, you can spend down savings, brokerage and custodial accounts in the student's name as long as what you buy benefits him or her, says Mark Kantrowitz, senior vice president of the Edvisors network of education resource sites.

The author of the upcoming book "Filing the FAFSA," Kantrowitz says the spending cannot be for expenses the parent is typically obligated to provide, like food, housing, medical care, etc.

But summer camp, a new computer or tutoring may all qualify. Check with a tax pro.

SEND SOMEONE ELSE TO COLLEGE

Your "expected family contribution" will drop when you have more than one family member in college at the same time, O'Shaughnessy says.

"While (the expected family contribution) might be $30,000 for one child, when you have two in school, the expected family contribution for each child drops to $15,000," she says.

A smaller expected family contribution typically means more aid per student.

If your kids are close in age, it may make financial sense to have the older one put off enrollment or get requirements out of the way at a cheap community college first.

MOVE MONEY INTO RETIREMENT ACCOUNTS

Qualified retirement accounts such as 401(k)s and IRAs do not count as assets when calculating financial aid, says college consultant Deborah Fox of Fox College Funding.

Maxing out retirement savings opportunities for yourself and your kid in the years leading up to college can help you move money from "countable" accounts to ones that will not affect your aid package.

But do not contribute money you expect to use for college expenses, since withdrawals from retirement funds can trigger taxes and penalties, and will be counted against the next year's financial aid offer.

PAY OFF DEBT

You can make savings and other non-retirement accounts effectively disappear from financial aid formulas by using the money to pay off debts such as auto loans and credit cards, Kantrowitz says. This also can help you reduce your expected family contribution on the FAFSA, although the private school form will take into account your increased home equity if you are paying down a mortgage

Another way to reduce savings is to accelerate a planned purchase. If you plan to buy a new car in the next few years, for example, you might consider using your cash to do so before the student's senior year in high school.

CHANGE YOUR CUSTODY ARRANGEMENT

The FAFSA asks applicants to list the income and assets of the custodial parent's household. In the case of remarriage, the income and assets of the stepparent are included as well, regardless of whether he or she plans to help with school expenses.

Having the child move in with the less affluent parent can result in a larger aid package. In the case of joint custody, the "FAFSA parent" is the one the child spends more time with, so it may be enough to simply extend his or her stay at one household.

 LOOK AT THE SIMPLIFIED NEEDS TEST

If your family income is low enough, you may qualify for the Simplified Needs Test, which disregards your assets when computing your expected family contribution.

To qualify, the parents' adjusted gross income must be under $50,000. All family members must be eligible to file simplified IRS forms (1040A, 1040EZ), exempt from having to file tax returns at all or are eligible for certain federal benefit programs, such as free or reduced price-school lunch, Supplemental Security Income or food stamps, Kantrowitz says.

If your family income is just above the $50,000 mark, you could see a significant increase in aid by lowering it, particularly if there are assets that would otherwise be counted against your student.