College Financial Aid: Know the Rules
By Zaina Bankwalla and Carrie Morris
When it comes to paying for college, the rules of financial aid can feel overwhelming, even for the most organized families. During ourTuitionCents 2025 webinar, College Financial Aid – Know the Rules, we set out to break down the complexities and give parents a clear roadmap.
Why? Because the families who understand the rules are the ones who make the most confident—and cost-effective—decisions.
Understanding the Types of Aid
One of the first things we shared is that not all financial aid is the same.
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Need-based aid is determined by your financial situation and what you report on the FAFSA or CSS Profile.
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Merit-based aid is awarded for achievements—academic, athletic, artistic, or other talents. Importantly, merit aid is available regardless of income.
Too many families assume aid is only for low-income households. That’s simply not true.
FAFSA: What’s New and What It Means
The FAFSA is the foundation for most financial aid, and recent changes mean families need to pay close attention. The transition from the Expected Family Contribution (EFC) to the Student Aid Index (SAI) has shifted the way eligibility is calculated.
For some families, this may mean less aid if they have multiple children in college at the same time. For others, it may open new doors. The bottom line: don’t assume the rules that applied five years ago still apply today.
How Assets and Income Are Treated
Another common misconception is how savings and investments affect aid. Here are some of the key distinctions:
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Retirement accounts (401(k), IRA, etc.) are not counted against you in aid formulas.
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Parent assets are assessed more lightly than student assets. A savings account in your child’s name can reduce aid eligibility far more than if the same money is held by a parent.
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Income matters more than assets. Because aid formulas prioritize income, families should review tax years carefully in advance of filing the FAFSA.
This is why we stress the importance of planning early—ideally in your student’s sophomore year of high school.
Planning Beyond Aid
Financial aid is critical, but it’s only one piece of the puzzle. Parents should also consider:
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Tax strategies that can free up additional cash flow.
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Scholarship opportunities beyond what the school offers.
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Cash flow planning to balance tuition payments with ongoing expenses and retirement savings.
College affordability isn’t about one single strategy—it’s about building a layered plan that protects both your child’s education and your future.
Our Message to Parents
We know this process can feel stressful, but you’re not alone. By learning the rules now, you give your family more options later. Whether your student is still in middle school or about to start senior year, there are always strategies to help you save money and reduce financial stress.
The earlier you start, the more control you’ll have. But even late-stage planning can uncover opportunities you may not have realized were available.
Frequently Asked Questions
Q: When should we start planning for financial aid?
A: Ideally by your student’s sophomore year of high school, since aid is based on “prior-prior” year tax data.
Q: Do retirement accounts affect eligibility?
A: No. Retirement accounts are excluded from FAFSA calculations.
Q: What’s the biggest change with the new FAFSA?
A: The move from EFC to SAI. This eliminates the “multiple child discount” and shifts how eligibility is calculated.
Q: Can high-income families still benefit?
A: Yes. Even if you don’t qualify for need-based aid, merit aid, tax strategies, and scholarships can significantly reduce costs.
Q: Should we accept the first financial aid offer we receive?
A: Not necessarily. You can appeal or ask schools to reconsider, especially if your circumstances change or you have competing offers.
We hope this recap gives you clarity and confidence. If you’d like to continue the conversation, join us for future TuitionCents webinars or reach out to The College Funding Coach® to learn more about building your personalized college funding strategy.