5 Tips to Maximize Financial Aid

Deadlines for state aid can be found here.

The FAFSA for the upcoming fall semester is based on 2010 tax returns, but there's no reason to wait.

Douglas recommends that families who want to fill out the FAFSA quickly use the previous year's tax filings to best estimate their assets and income for 2010. Corrections to the application can be made later.

2. Student Assets Count More

To avoid any unpleasant surprises, it's important to understand how the FAFSA calculates your expected family contribution. The formula is complicated, but one of the more important rules to remember is that student assets and income are weighted far more heavily than those of a parent.

For example, about half a student's income is counted, compared with a sliding scale that tops out at 47% of a parent's income. And about 20% of a student's assets are factored into the overall contribution. That compares with a sliding scale that maxes out at about 6% for a parent's assets.

It's too late now to strategize for a fatter aid package for the upcoming school year. But in the year ahead, consider using a student's income and assets on education expenses before dipping into a parent's funds. That will maximize the aid package offered for the following year.

3. Gifts Can Be Optimized

Financial gifts from friends and relatives are counted as student income in determining aid packages.

If you're looking to maximize aid, ask friends and relatives to save their financial contributions for the student's senior year. Aid for each year is based on the student's financial information from the previous year.