Paying for College the Right Way: FAFSA Tips and Financial Planning Strategies for Affluent Families

It’s a story countless families know too well. You’ve been diligently saving for years, balancing college contributions with retirement goals, and feeling confident that you’ve done everything right to confidently fund your child’s college education without upsetting the fruit basket too much.  

Then the acceptance letters start arriving, along with financial aid offers that are confusing at best and disappointing at worst.  

Your child has their heart set on a dream school, but the line-item total is greater than the 529 balance. Do you dip into investments? Take on loans? Say yes now and figure it out later?  

It’s an emotional moment for even the most financially prepared families. As a father of college-aged kids, I've experienced it multiple times over. And as a senior wealth manager, I've seen it’s where many people risk making costly decisions that can ripple for years.

The good news? There’s a better way to approach this phase of college funding—one that combines clear financial strategy with a thoughtful understanding of the FAFSA process.  

By treating college funding like any other major financial goal, you can make confident choices that support your child’s future without sacrificing your own.  

This guide will walk you through how to do exactly that: understanding what the FAFSA really means for high-net-worth families, identifying common mistakes, and building a college funding plan that fits your broader financial life. 

The FAFSA (and the CSS Profile): Why High-Net-Worth Families Should Still File 

Even families that can comfortably afford college should almost always complete the FAFSA — here’s why:  

• Some colleges require the FAFSA to consider a student for merit or institutional awards. Not filing can disqualify students from scholarships.  

• Financial circumstances can change. Filing freshman year preserves eligibility if the family experiences job loss, illness, or other financial shocks later.  

• It takes just a little time and can unlock non-repayable aid or more favorable packaging than you expect. Use the federal aid estimator to see a ballpark of eligibility.  

If a college uses the CSS Profile (mostly private schools and some institutional programs), complete that too. The CSS Profile digs deeper into household finances and drives institutional aid decisions that the FAFSA does not cover. Check each college’s financial-aid website to confirm requirements.  

What’s Changed: The Big Federal Updates to Know 

Recent federal FAFSA reforms simplified the form and replaced the old EFC (Expected Family Contribution) metric with the Student Aid Index (SAI).  

The new SAI changes how some families are assessed and may produce different grant eligibility than older calculations. Federal forms and help pages explain the SAI and how aid is calculated. Use the Department of Education’s SAI resources when you run scenarios.  

The Most Common FAFSA & CSS Profile Mistakes (and How to Fix Them)  

1. Skipping the FAFSA or filing late. Some state grants and institutional funds are first-come, first-served. That's why we always recommend submitting early (check college and state priority dates).  
2. Reporting retirement accounts as assets. Retirement accounts (401(k), IRAs, pensions) are not reported as FAFSA assets, but accidental inclusion will artificially inflate your SAI. Double-check fields to ensure you're leaving retirement accounts off.  
3. Misreporting home equity. The FAFSA excludes your primary residence from assets, but investment properties or second homes must be reported. Know which properties count before filing.  
4. Wrong 529 reporting / wrong owner assumptions. Who owns the 529 matters. Under current federal rules, parent-owned 529s are reported as parental assets; grandparent-owned 529s generally do not count on the FAFSA, but many private colleges’ CSS Profiles treat 529s differently. (This is one of many reasons that coordinating your strategy with a trusted financial advisor is key.  It can get really complex really fast.) 
5. Over-stating ability to pay on the CSS Profile. The CSS Profile asks colleges for a parent contribution estimate. Putting a number larger than your SAI (or more than you really want to commit) can increase the college’s expected family contribution. Use your SAI and household plan as guidance and save “special circumstances” text for a formal appeal if needed.  
6. Not using the IRS Data Retrieval Tool (when eligible). Using the IRS DRT securely transfers tax data to the FAFSA, reduces errors, and lowers the chance of a verification request. If eligible, use it — it’s faster and safer.  

Quick FAFSA Checklist: Documents and Steps  

1. Create FSA IDs for the student and for one parent (required to sign the FAFSA online).  
2. Gather documents: Social Security number, driver’s license, prior year tax return (1040), W-2s, bank and investment statements, 529 balances, business/farm valuation if applicable, records of untaxed income (if any).  
3. Use the IRS Data Retrieval Tool if eligible to auto-populate tax fields (reduces verification).  
4. List colleges (you can add multiple schools on the FAFSA online). For any school that requires a CSS Profile, check their deadlines and requirements on the College Board site.  
5. Submit early — many state and institutional priority deadlines fall in the fall or early winter. After submission, save copies of your confirmation and SAI results.  

Build Your “College Pre-Approval” 

Start by counting only the family resources you’re comfortable spending (exclude retirement funds and emergency reserves you want to preserve). Typical buckets:  

• Parent resources: 529 balances owned by parents, college-designated brokerage/savings, gifts committed by grandparents (documented), and the amount of ongoing cash flow you’ll allocate to tuition.  

• Student resources: expected work-study/part-time earnings, scholarships the student is likely to receive.  
• Loans (if any): Stafford/federal student loan limits, private student loans, and Parent PLUS loans (if you plan to use them).  

Here’s an example:  

Parent Resources  

• 529 savings (parent-owned): $60,000  

• College-designated brokerage/cash: $40,000  

• Ongoing cash flow (family contribution each year → 4 years): $20,000/year → $80,000  

Total parent resources = $180,000  

Student Resources:  

• Part-time earnings & scholarships: $10,000  

• Student loans (reasonable cap you’ll authorize)  

• Federal student loans (student): $27,000 (typical aggregate limit)  

• Private student loans you’d allow: $23,000  

Total four-year budget = parent + student + authorized loans = $240,000  

Use the federal Loan Simulator to see how a given loan balance converts into monthly payments under different repayment choices, then decide how much loan the student/household can reasonably carry.  

A useful rule of thumb: keep a student’s total loan balance at or below their likely starting salary. That helps avoid a debt burden that forces poor career decisions.  

Loan Strategy Notes for High-Net-Worth Families  

• Stafford/Direct Loans (student loans) have annual and aggregate limits; they’re often the cheapest option for students. Check federal limits.  

• Parent PLUS loans let parents borrow up to the cost of attendance minus other aid, but they include a credit check and are unsubsidized. If you’re considering Parent PLUS, model the repayment and consider the effect on your retirement and cash flow — particularly because federal repayment rules and legislative changes can alter borrower protections over time. (Always verify current Parent PLUS rules when you plan.)  
• Private loans can fill gaps but compare rates, terms, and borrower protections. For some families, a modest private loan is preferable to raiding retirement accounts or home equity.  

What Comes Next 

1. Run the federal estimator and loan simulator with your numbers to see possible SAI, grants, and sample payments. (Federal tools are the canonical source for ballpark results.)  
2. Check each college’s aid calendar — state and institutional deadlines differ and sometimes close early. Submit the FAFSA and any required CSS Profile by priority dates.  
3. Document grandparent/gift support in writing if grandparents intend to contribute — that clarity prevents surprises in packaging decisions and when comparing net cost across schools.  
4. Build a conservative “pre-approval” (as above) and shop for schools by net price (sticker price minus expected institutional and federal aid), not sticker price alone. Use college net-price calculators and compare apples-to-apples. Many colleges publish net-price calculators on their websites.  

Final Thought: Keep Long-Term Goals Central  

The smartest college funding strategy protects both your child’s educational opportunities and your long-term financial health. A clear pre-approval budget, accurate FAFSA/CSS filings, and a conservative loan cap aligned with expected earnings typically produce the best outcomes: less stress, fewer tradeoffs later in life, and more freedom for both generations. 

Like we mentioned above, college funding can get very hairy and complex very fast, so it’s best practice to have a trusted wealth manager on your side to help navigate the best strategy for your family and your goals. Get in touch today and we’ll build a fiduciary-focused comprehensive strategy that brings clarity and confidence to all your financial goals.