Whether it's accounting for your assets, available cash or reportable income, we provide answers to your biggest FAFSA questions.

I am confused about the income reporting portion of the Free Application for Federal Student Aid (FAFSA®). Some of my friends say there are “tricks” you can use to make your income appear lower so your student can receive more federal student aid. If this is true, what steps should I be taking now?

The FAFSA does ask for a lot of financial information, and you do want to make sure you take full advantage of the federal student aid opportunity. Keep in mind, though, that the FAFSA is not a one-time event. You will be submitting information for as long as your student is in college and possibly longer if other children in your family will be attending college in the future. Actions you take to increase student aid this year could actually lower it next year.

Whose income is reported on the FAFSA?

Your dependency status determines what income information is needed for the FAFSA. Dependent students report both their financial information and their parents’ when completing the FAFSA. Independent students report their own financial information, including a spouse and any dependents.

What is the Income Cap for Federal Student Aid?

There are no income requirements or cap to the amount of money you can earn to qualify for federal student aid. Many factors go into the financial aid equation, such as the number of children in college and the parents’ age.

The FAFSA asks about income as well as assets.

What does the income determine on the FAFSA?

This information is used to calculate a reasonable percentage of your family’s income and assets that can be used to contribute to your student’s college education. This is known as the Expected Family Contribution (EFC). The EFC is calculated based on your Adjusted Gross Income (AGI) and other income sources. The AGI is the bottom-line income amount used to determine your tax basis for federal income tax purposes and can often be retrieved directly from your tax returns or the Internal Revenue Service (IRS).

What income must be reported?

The FAFSA asks about income as well as assets. Use the information from your Form W-2s to report income earned by the student and parents. The FAFSA will want information on available cash, balances in savings and checking accounts, and any investment portfolios. All real estate holdings other than the house you live in must be listed. Parents will need to record all business or farm assets. You will also need to report untaxed income, such as child support received, interest income and any non-education veterans’ benefits.

What if we have a large amount of cash available?

Available cash counts toward your ability to pay for college and will be factored into the EFC, which can reduce the amount of federal student aid you receive.

If you want to maximize your eligibility for financial aid, and you do not want to use the cash for living expenses, college tuition or consumer debt, you could consider making a contribution to a qualified Individual Retirement Account (IRA) plan or paying down your mortgage. When planning your budget, remember to take into consideration how long your student will be in school.

Should we “gift” any money to our student?

This is usually not helpful as the FAFSA also looks at the student’s financial information. In general, colleges calculate that a higher proportion of the student’s resources should be available to pay for college, so such a move may actually lower the amount of student aid received.

It may not be wise to make drastic financial decisions based solely on trying to qualify for a higher level of federal student aid. Look at your family’s entire financial picture and talk to a financial planner to determine what moves are best for you now and in the future.

About the Author

Jodi Okun is founder and president of College Financial Aid Advisors and a Discover Student Loans brand ambassador. Visit her website at collegefinancialaidadvisors.com. She is also the About.com Money Expert on “Paying for College,” and was recently acknowledged as one of the “Top 30 Social Influencers in Personal Finance & Wealth.” She has been featured in The Wall Street Journal, Mashable, US News & Education and The Huffington Post. The opinions expressed in this article are Jodi’s and do not necessarily reflect the opinions of Discover Student Loans.

FAFSA is a registered service mark of the U.S. Department of Education.