How to get the most aid: "It's not a good idea to try to shift assets around in the last year before your child goes to college, because it'll be apparent on your financial statements that you are trying to shelter income. But if you have at least two years to plan, here are some ideas to consider:
Sell any stock that you plan to use for tuition two years before you apply for financial aid. You don't want the capital gains to be reflected in the previous year's income, since that's what is used to calculate your income for the forms.
Put the money in your own name, not your child's. The tax savings you miss out on will be more than offset by the difference in the financial aid your child is eligible for.
'Never, ever put money in the child's name, unless you expect to get no financial aid,' says Mark Kantrowitz, publisher of www.finaid.org. He explained that while the federal formula expects contributions of 35 percent of your child's savings each year, the parents' maximum contribution is 5.64 percent of their own savings. But even then, only 10 percent of parents have any of their assets considered at all, thanks to exemptions for the primary home, cars, life insurance and retirement accounts.
Parents who qualify to file their taxes using the 1040A or 1040EZ forms who have less than $50,000 in income a year don't have to consider their assets at all, Kantrowitz says. Otherwise, the first $40,000-$45,000 of income is disregarded.
If you have special circumstances -- you're losing your job, or you have medical expenses for people who live with you, or expenses to care for folks who aren't your children, or you're paying private school tuition for other children in the family -- send a letter directly to the financial aid office of the school your child plans to attend. Include documentation."