Since annuities are generally not assessed in the EFC calculations, it may be advantageous to convert assessable assets, such as CDs or cash to non-assessable annuities before the financial aid application is signed. Another advantage of an annuity, as a college savings investment is the tax-deferral of earnings.
The parents reduced their assets by $5,000 by converting assessable assets to annuities. Since the parents assets were assessed at 5.6% the asset reduction may increase the childs financial aid eligibility by $280 ($5,000 x 5.6%).
If you are in a financial aid asset assessment rate of 5.6%, you could increase your financial aid eligibility up to $56 for every $1,000 of asset reduction by converting assessable assets to annuities.