If you own a small business with fewer than 100 employees, here is something to consider to improve your eligibility for financial aid. Public universities use the FAFSA to collect information about your income and personal, non-retirement assets. They place a zero value on family businesses that employ fewer than 100 people. Don’t be offended – this is actually a good thing!
The FAFSA will ask for your income for the prior two calendar years, as reported on your 1040. They will ask you for the value of your various personal, non-retirement assets – checking, savings accounts and brokerage accounts – on the date the FAFSA is filed (generally, the autumn of your student’s senior year of high school). Small business owners can take advantage of these facts to loan their small businesses money from their personal accounts prior to completing the FAFSA to remove those dollars from the FAFSA, lower their family’s Expected Family Contribution and raise their eligibility for financial aid.