Q. I know I’m supposed to position my money long before we apply for financial aid. What moves should we consider making?
— Mom

A. There’s no comprehensive checklist that works for every family, but there are several planning principles everyone should consider.

There is no one particular financial move which everyone should make when planning for college funding. But there are important principles which everyone should consider.

First, financial aid is part of the “enrollment management” process that colleges use to get the students that they are looking for, said David Slater, co-founder of College Benefits Research Group (CBRG) in Roseland.

“If your student positions well at the schools they are applying into and if the colleges provide need and merit based aid, then how you have your assets positioned can have serious consequences and impact,” Slater said.

It is important to understand this because some types of assets have to be reported when applying for financial aid, Slater said, and this can vary depending upon which financial aid forms each school requires.

For example, Slater said, the FAFSA (Free Application for Federal Student Aid) does not include your primary residence in any of their aid calculations. But if the school asks for additional forms such as the CSS Profile form (administered through the College Board), then home equity will negatively impact financial aid eligibility, he said.

Slater’s partner, Steven Sirot, co-founder of College Benefits Research Group (CBRG) in Roseland, said another mistake people often make without realizing it until it is far too late is using qualified retirement distributions to help pay for college.

“Not only do the monies withdrawn now show up as reportable assets, they also count as additional income in the calculation,” Sirot said. “Adding these negatives to the tax implication and potential penalties make this one of the worst moves well-intentioned parents can make.”

Sirot and Slater said parents also need to realize that while some college savings plans such as 529s and UGMAs have many benefits, they can also have drawbacks.

529 plans allow for tax-deferred growth that may be withdrawn tax-free if used for qualified educational expenses, they said, but because the parents are often the owners of these plans, all monies saved — even if saved for multiple children — will be assessed when that first student attends college.

And they said savings owned by the student, such as UGMAs/UTMAs, are assessed over four times the amount as savings owned by the parents.

“Bottom line, you must understand how the process works, what the forms ask for, and how your student positions and the particular schools which they are applying to,” Sirot said.

Karin Price Mueller writes the Bamboozled column for The Star-Ledger and she’s the founder of NJMoneyHelp.com. Click here to sign up for the NJMoneyHelp.com weekly e-newsletter. Like NJMoneyHelp.com on Facebook and follow it on Twitter.

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