Six Key Strategies to Lower Your SAI (Formerly EFC)

Learn six effective strategies to reduce your Student Aid Index (SAI) and maximize your eligibility for need-based financial aid. Plan ahead to lower your SAI for the 2025-2026 academic year.

The Student Aid Index (SAI), previously known as the Expected Family Contribution (EFC), plays a crucial role in determining your eligibility for need-based financial aid. Lowering your SAI can increase your chances of receiving financial assistance. Here are six strategies to help you reduce your SAI effectively.

1. Contribute to a Roth IRA

Contributing to a Roth IRA can be a strategic move to lower your SAI. Funds in retirement accounts like Roth IRAs are not counted as assets in the SAI calculation. Additionally, Roth IRA contributions are not added back to your income, which can further reduce your SAI. Ensure you meet the income requirements before contributing.

2. Shift Assets and Minimize Cash Holdings

The SAI calculation considers the value of your assets. To reduce your SAI:

  • Transfer Assets: Move assets from your child’s name to a parent’s name, as student assets are assessed at a higher rate than parent assets.
  • Utilize 529 Plans: Contribute to 529 college savings plans owned by grandparents, as these are not counted as parent assets.
  • Reduce Cash Holdings: Minimize cash and savings accounts, as these are fully assessed in the SAI calculation.

Be mindful that the FAFSA does not assess home equity, so paying off a mortgage can be a good strategy.

3. Optimize 529 Plan Ownership

The ownership of 529 plans can impact your SAI:

  • Parent-Owned 529 Plans: These are considered parental assets and have a lower impact on the SAI.
  • Grandparent-Owned 529 Plans: Distributions from these plans are not counted as income to the student until the sophomore year, reducing their impact on the SAI.

Strategically managing the ownership and timing of 529 plan distributions can help lower your SAI.

4. Reduce Student-Owned Assets

Student-owned assets are assessed at a higher rate than parent-owned assets. To lower your SAI:

  • Transfer Assets: Move assets from your child’s name to a parent’s name or a grandparent’s name.
  • Utilize Custodial Accounts: Consider using custodial 529 accounts, as these are considered parental assets for financial aid purposes.

Reducing the amount of money in your child’s name can significantly lower their SAI.

5. Lower Your Income in the Base Year

The base year for the SAI calculation is the prior-prior year. Lowering your income during this year can have a substantial impact:

  • Defer Income: If you’re self-employed or a business owner, consider deferring income to a future year.
  • Increase Deductions: Maximize deductions to reduce your taxable income.
  • Avoid Bonuses: Postpone receiving bonuses or other income until after the base year.

Lowering your income can reduce your SAI and increase your eligibility for financial aid.

6. Plan Lifestyle Changes Strategically

Certain lifestyle changes can affect your SAI:

  • Postpone Remarriage: Your significant other’s income isn’t required on the FAFSA unless you’re married.
  • Manage Household Size: The number of family members in the household can impact the SAI calculation.
  • Consider Independent Status: If your student qualifies for independent status, their SAI will not include parental income and assets.

Strategically planning lifestyle changes can help lower your SAI.

Conclusion

Lowering your SAI requires careful planning and strategic financial decisions. By contributing to retirement accounts, shifting assets, optimizing 529 plan ownership, reducing student-owned assets, lowering income in the base year, and planning lifestyle changes, you can effectively reduce your SAI and increase your eligibility for need-based financial aid. Always consult with a financial advisor to ensure these strategies align with your family’s financial situation and goals.