This article is from the Financial Aid, Scholarships, and Fellowships FAQ, by Mark Kantrowitz with numerous contributions by others.
Many financial aid consultants suggest various ways of taking
advantage of loopholes in the financial aid system. Some of these
strategies are sound, but others have backfired on the families
who follow them. For example, a few years ago some "consultants"
advised parents to amend their previous year's tax returns to
remove their child as a claimed exemption. The idea was to qualify
the child as an independent student when applying for financial
aid. Not only can this trigger an audit, but financial
independence is not the only requirement for determining
independent status. Parents who followed this advice lost a fair
amount of money in lost tax savings, not to mention fees paid to
If the advice you receive involves questionable ethics, think
twice before following it. There is good advice and there is bad
advice. Good tips include spending student assets before parent
assets, keeping investments in the parent's name, and reducing
family income below the $50,000 threshold that causes assets to be
ignored. Any financial aid administrator will admit that these
strategies take advantage of genuine loopholes in the need
analysis formula. But there are also strategies that try to
circumvent the system, instead of trying to work within the
rules. Unethical tips include hiding assets, trying to qualify a
truly dependent child as an independent, or providing false
information on a financial aid form.