How to reduce your EFC to zero: become self-employed
You can reduce your EFC to zero and automatically maximize your federal and college financial aid by being self-employed and controlling your own W-2. This is certainly not what most financial aid advisers will recommend that you do, but it is the way college financial aid works. It is the great secret of the federal government that people who do not know prefer.
The FAFSA student aid form, CSS profile, and the college’s own independent financial aid form are dependent on the W-2 income of parents and students. Assuming you are not unemployed, there is a huge benefit to becoming self-employed. You can form a corporation, like an S-Corp, and control the income on your own W-2.
I advise you to obtain a competent CPA who is well versed in the college financial aid process. The CPA should be able to guide you on the best type of corporation to form. There are General Corporations, S-Corps, LLC or Limited Liability Companies and Partnerships. Each has its own advantages and disadvantages.
Colleges will generally request copies of all submitted tax documents, so you need to make sure they are completed correctly. And make sure that when you mail the tax documents to the school, they are the ones you submitted to the federal government. There are those who modify the tax documents to receive financial aid. That would be tax fraud and is not something you want to do.
What type of business can you create?
- If you are an accountant, create your own public accounting firm.
- If you are a plumber or electrician, get all the licenses and certifications you need and become self-employed;
- If you are a carpenter, become a licensed contractor;
It doesn’t really matter what you do, as long as you can provide a service and do it independently, you should be able to form some kind of licensed company.
For the 2010-2011 college year, the magic number for your W-2 income on the FAFSA form is less than $ 49,999. This puts you on the simplified federal worksheet that eliminates the need to report any of your assets.
Now, the key to reducing your EFC to zero is to reduce your w-2 income to less than $ 30,000 and also qualify for one of the federal assistance programs, such as Food Stamps or the Free Lunch Program. Also, your income from the previous year must have been less than $ 49,999.
To see how a family qualifies for one of these federal aid programs, I went to the NYC Food Stamp Program Eligibility Screening Tool and created a divided family of four, with an income of $ 30,000 and two children: one eighteen and one twelve. The result: the family was eligible for the New York State food stamp program. This eligibility will automatically reduce the EFC to zero and maximize your child’s college aid.
To try it yourself, visit: https://www.mybenefits.ny.gov/selfservice/. The maximum gross income to qualify for food stamps as of October 1, 2009 was $ 28,668 for a family of four, with each additional family member adding $ 4,872 to the total.
- Make sure your child works off the books or does volunteer work during the year before he applied for help; the income from the previous year is the income you look at;
- Also, do not allow students’ grandparents to charge your child’s account with money. Once your child starts college, ask the grandparents to provide cash funds.
Your child’s income has a detrimental effect on college aid because 50% of it is taken into account during the FAFSA calculations.
Getting a certain amount of financial aid for college is certainly doable for most of us, but there is a huge benefit for those who are self-employed.