Adapting to future needs.

How to Zero Your EFC: Become Self-Employed

You can reduce your EFC to zero and automatically maximize your federal and college financial aid if you’re self-employed and in control of your own W-2. Certainly, this is not what most financial aid advisors will advise you to do, but it is the way college financial aid works. It is the great secret of the federal government that they prefer people not to know.

A college’s FAFSA student aid form, CSS profile, and stand-alone financial aid form depend on the W-2 income of the parents and students. Assuming you’re not unemployed, there’s a huge benefit to becoming self-employed. You can form a corporation, such as an S-Corp, and control the income on your own W-2.

I would advise you to get a competent CPA who is well versed in the college financial aid process. The CPA should be able to guide you regarding the best type of corporation to form. There are General Corporations, S-Corps, LLC or Limited Liability Companies and Partnerships. Each has its own advantages and disadvantages.

Colleges typically require copies of all submitted tax documents, so make sure they are filled out correctly. And make sure that when you send your tax documents to the school, they are the ones you filed with the federal government. There are those who modify tax documents to receive financial aid. That would be committing tax fraud and it’s not something you want to do.

What kind of business can you create?

  1. If you’re an accountant, start your own CPA firm.
  2. If you’re a plumber or electrician, get all the licenses and certifications you need and be self-employed;
  3. If you’re a carpenter, become a licensed contractor;

It doesn’t really matter what you do, as long as you can provide a service and do it independently, you should be able to form some sort of licensed company.

For the 2010-2011 college year, the magic number for your W-2 income on the FAFSA form is less than $49,999. This puts you on the simplified federal worksheet that eliminates the need to declare any of your assets.

Now the key to getting your EFC down to zero is to get your w-2 income down to less than $30,000 and also qualify for one of the federal assistance programs like food stamps or the free lunch program. Also, your prior year income must have been less than $49,999.

To see how a family qualifies for one of these federal aid programs, I went to the New York City Food Stamp Program Eligibility Screening Tool and created a split family of four, with an income of $30,000 and two children, one eighteen and the other twelve. The result: the family was eligible for the New York State food stamp program. This eligibility will automatically reduce the EFC to zero and maximize your child’s college aid.

To try it for yourself, visit: https://www.mybenefits.ny.gov/selfservice/. The maximum gross income to qualify for food stamps as of October 1, 2009 was $28,668 for a family of four, with each additional family member adding $4,872 to the total.


  • Make sure your child works off the books or does volunteer work during the year before you apply for help: Earnings from the previous year are the earnings being analyzed;
  • Also, don’t let grandparents of students load their child’s account with money. Once your child starts college, ask grandparents to provide cash funds.

Your child’s income has a detrimental effect on college aid because 50% is factored into the FAFSA calculations.

Securing some amount of financial aid for college is certainly feasible for most of us, but there is a huge benefit to those who are self-employed.

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