The Ins and Outs of Financial Aid (part 2 – the FAFSA)

25 May 2015

The dreaded FAFSA (aka the Free Application for Federal Student Aid) can seem very daunting to any parent, no matter how many times they have filled it out.

However, the FAFSA is VERY important to fill out for every family who has a student going to college, and it’s very important that they fill it out CORRECTLY.

Why?

Well, even if you don’t qualify for need-based aid, the FAFSA can offer you low-interest-rate loans, such as the Stafford Loan or Parent Plus loan. States also use the FAFSA to determine state grants, and a number of private institutions require you to fill it out in order to determine need-based options at the school level and qualifications for work-study jobs on campus. Was your family’s net income less than 150,000 this past year? The California Student Aid Commission uses the FAFSA to qualify families who make less than 150,000 for their middle class scholarship, which provides up to 20 percent of tuition to a UC or CSU school.

It’s definitely worth filling out, no matter who you are.

And don’t worry, we’re here to help.

The FAFSA form can be confusing sometimes, so here are some tips and tidbits that you definitely want to pay attention to:

1. Make sure that you accurately report your assets.

Individual retirement accounts, 401k accounts, 403b accounts, pension plans, and annuities are not counted as assets on the FAFSA. Also, if you have a 529 plan for your student, list it as an asset for the parent. If it’s listed under the student’s assets, it will be calculated more harshly.

2. Don’t include the equity of your primary home on the FAFSA.

Only include equity in other real estate (like rental homes). If you own a hotel, and that real estate is owned by a business entity, it’s calculated as a business asset, not a personal asset.

3. The order of the schools you report on the FAFSA matters.

A while back, Lynn O’Shaughnessy did a story about how colleges were using the order of the schools listed on the FAFSA to judge whether or not a student was truly interested in going to that college or not and then offering less money if the student listed their institution as the student’s first choice. You can read more about that study here. My advice, and hers, is to list schools in alphabetical order to avoid that conflict. Remember that other schools can see where else your student is applying through the FAFSA.

4. The way aid is calculated is based on each family’s circumstances.

For instance, your financial aid calculation will be entirely different if you have more than one student in college, an increased number of dependents, etc. You should definitely take the time to fill it out in case you qualify for something you weren’t aware of.

5. The FAFSA is based off of last year’s taxes. 

They compare what you’ve reported with what you reported to the IRS. (If you think you can adjust the number or lie, think again.) In fact, right in the application, you can use the IRS retrieval tool to speed up the process if you qualify.

6. What do you report if you’re divorced?

The parent who files should be the parent that the student lives with the majority of the time during the twelve-month period AFTER the date the FAFSA is filed.

 

Hopefully this helped you find your footing as you start your FAFSA-filing process!

If you want to get a feel for it now, you can find the form here at http://fafsa.ed.gov/.  Keep in mind the FAFSA opens for incoming students on Jan 1st of each year and the priority deadline is usually March 2nd.

And remember, if you have any further questions, feel free to call March Consulting at 661-747-4514 or book an appointment!

GOOD LUCK!

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