Aside from the ethical and legal aspects of shifting assets and income to manipulate the system, almost anything you do to affect your Estimated Family Contribution (EFC) will have an impact on your personal income, assets, and taxes.

What about shifting assets?

For example, you may decide to spend all your personal savings on a new car, hoping this would lower your EFC by lowering your assets.

But would spending $40,000 on a car mean your child would get $40,000 more in financial aid? No. Only a maximum of 5.64% of your assets are counted in the financial aid formula.

This would be like giving up $40,000 for $2,260 (at most) in additional financial aid (some of which will be loans).

Not only would you be trading real dollars you have for pennies in aid, but when you need the money, you won't have it. You’ll have to borrow the funds and pay them back with interest.

Common sense principles

The following common sense principles will affect how financial aid works for your family. Following them should keep you from having a higher EFC than you should.

Don't overpay your share. Some parents believe that they are 100% responsible for financing their child's education. This is not the view of the federal government or college financial aid offices. They believe that the responsibility rests with:

• The student first
• Parents second
• College, including financial aid, last

The financial aid formula assumes that students will contribute a large percentage of their income and assets to pay for each year of college.

If parents pay for everything and let their children keep their savings accounts untouched, they will be penalized, because the formula will keep assessing the same high percentage against the child's assets every year.

Build your 401(k) and IRA accounts. Under the federal and institutional methodologies, your retirement accounts are not considered assets that can be used to pay for college. Plus, under current tax laws, you may withdraw money from these accounts and use it to pay tuition without paying a penalty.

Check your pride at the door. Some families are embarrassed to reveal financial information to a total stranger, but this kind of pride could cost you. While financial aid calculations seem very mechanical and pre-determined, they are not. Your financial aid administrator is a professional who can can strongly influence the process.

If you have suffered a setback — especially one that is not reflected in your past year’s taxes — let your financial aid officer know. He or she can modify the results of the financial aid calculations.

The bottom line: Financial aid administrators are there to help and can save you money if you let them.

Best advice for a low EFC

Don't waste time with strategies that may result in tiny increases in financial aid (which may be offset by higher taxes or lower asset levels) and that, at worst, could result in fines or jail time. Instead, focus on getting your taxes done early and correctly.