When Should Parents Plan for College?

Key Takeaways

• Begin college financial aid planning by middle of sophomore year in high school, when the tax year they'll report on FAFSA is determined—not senior year when most parents start thinking about it
• Avoid creating unnecessary capital gains or taking 401k distributions in the year before FAFSA is filed, as these spike reported income and reduce financial aid eligibility
• If you receive a promotion or income increase, inform the college's financial aid office in writing to explain why reported income doesn't reflect ongoing earnings—many families overlook this explanation step
• Understand that certain investment and savings accounts held by children can significantly reduce financial aid; start learning about strategic account placement early enough to make changes that won't show up on the relevant tax return