Avoiding a FAFSA faux pas
The only thing standing between you and free college cash is one little form. The Free Application for Federal Student Aid (FAFSA) is the document the government uses to determine who gets financial aid and who doesn't. Using financial data from dependent students and their parents, the FAFSA's sole purpose is to determine your Expected Family Contribution -- the amount the government believes your family can chip in for your education. Unfortunately it's easy to make FAFSA errors that can cost you scholarship dollars. Here's how to sidestep the most common mistakes.
File It Anyway
The biggest mistakes families make is not filing the FAFSA, says Megan McClean, director of policy and federal relations for the National Association of Student Financial Aid Administrators.
"[Some] people presume that they make too much money to receive federal financial aid, but I think one thing people don't realize is that even if you want a federal student loan, and there is a type of student loan that is non-need based, you still do have to fill out the FAFSA," she says.
In addition to qualifying students for federal grants, loans and work-study jobs, the FAFSA is oftentimes used by states, colleges and private scholarship programs to determine who's eligible for non-federal funds.
Mark Kantrowitz, author of the free e-book, "Filing the FAFSA: The Edvisors® Guide to Completing the Free Application for Federal Student Aid," adds that families often forget that their aid eligibility can change while a student is in school.
"Sometimes a family will file the FAFSA when their eldest child enrolls in college for the first time, and they might not get anything other than low cost loans," he says. "The next year they'll say, 'Why bother?,' but that year they would have had two children in college, which makes a big difference in the amount of aid eligibility."
Other factors like divorce or unexpected medical bills can also dramatically impact aid eligibility from one year to the next.
Do It Now
Filing early pays…literally. While some programs like the Pell Grant are available year-round to all qualified students, others like the Federal Supplemental Educational Opportunity Grant (FSEOG), the Perkins Loan and work-study jobs have finite funds.
"The funds are so limited for each of those programs that the money gets utilized very quickly," says Mary Lawyer, associate vice president for enrollment management at Siena College in Loudonville, New York. "Some schools may take a first come, first serve approach in awarding those federal funds."
The FAFSA becomes available January 1 each year, but many families put off filing it until they've completed their taxes for the previous year. That's a mistake too says Melinda McAllister, a financial aid officer at Armstrong Atlantic State University in Savannah, Georgia.
"We encourage students to file [the FAFSA] early and then make corrections if data changes after a tax filing," she says.
The Free Application for Federal Student Aid (FAFSA)
The FAFSA is open to any U.S. citizen, permanent residents, and select non-U.S. citizens who fit very specific criteria. To qualify for federal aid, applicants must have a high school diploma, GED or homeschool education equivalent and be enrolled in an eligible degree or certificate-granting program. Some federal aid programs require students to be enrolled at least half-time and all require students to maintain "satisfactory academic progress," which varies from college to college.
Federal grants and loans awarded through the FAFSA can be used at almost any accredited two or four-year college nationwide as well as at qualified vocational training programs and professional degree institutions. Funds can be used to pay tuition as well as for other college expenses such as room and board costs, supplies and book fees. If you want to go international, don't sweat it. Federal funds can also be applied to study abroad programs conducted through most US colleges and universities and for programs at international schools that participate in the federal student aid program.
The FAFSA becomes available as of January 1 each year and families are advised to file as early as possible. States each have their own deadlines for completing the FAFSA. A full list of FAFSA deadlines by state is available at https://fafsa.ed.gov/fotw1415/pdf/Deadlines.pdf.
The federal government uses the FAFSA to dole out more than $150 billion in grants, loans and work-study jobs each year. The FAFSA qualifies students for federal awards, even awards that aren't based on financial need, and it can also qualify you for awards given through your state, college and through private organizations.
Head to https://fafsa.ed.gov/ to apply. If you need help, the nonprofit organization College Goal Sunday offers free FAFSA assistance at sites throughout the U.S.
Report the Right Assets
Money in a savings fund, 529 college savings plan or brokerage account is fair game, but certain assets are sheltered from the federal needs formula.
"Anything that's in a retirement plan does not have to be reported on the FAFSA," says Becky Powell, program director for College Goal Sunday Michigan, a nonprofit that offers free financial aid advising for students.
Reporting assets in a 401(k), IRA or pension plan can erroneously drive up your family's assets and reduce your financial need. Powell adds that life insurance plans, tax-deferred annuities and home equity on your family's primary residence are also off limits on the FAFSA, as are assets like cars and recreational vehicles.
Choose the Right Parent
The parent who has legal custody may not be the one considered on the FAFSA. According to the Department of Education, dependent students of divorced parents who aren't living together should include financial information on the parent that they've lived with the most time during the past 12 months. If that parent is remarried, the student must also include data on their stepparent.
In previous years, the FAFSA only required financial information on one parent in divorced and unmarried families, even if both parents were living together. As of this year, the FAFSA now considers married, unmarried and divorced parents as two-income households if both parents are living under the same roof. This also applies to parents of the same gender, even if they're living in a state that doesn't recognize same-sex unions.
For students who aren't living with legal parents or guardians, the FAFSA can become even more confusing, says Becky Powell.
"If [the student lives with] a grandparent and the grandparent has not adopted that student, the grandparent's income is not used," she says. "They will still use the parent's income…"
If you have questions, help is available. College Goal Sunday offers free assistance filing the FAFSA at sites across the country.
Filing the FAFSA, Edvisors, http://www.edvisors.com/financial-aid/eligibility/fafsa/user-info/book/
"Education Department Announces Changes to FAFSA Form to More Accurately and Fairly Assess Students' Need for Aid," ed.gov, April 29, 2013, http://www.ed.gov/news/press-releases/education-department-announces-changes-fafsa-form-more-accurately-and-fairly-ass
"Who Is My 'Parent' When I Fill Out the FAFSA?" Federal Student Aid, http://studentaid.ed.gov/sites/default/files/fafsa-parent.pdf
Basic Eligibility Criteria, Federal Student Aid, http://studentaid.ed.gov/eligibility/basic-criteria
International Schools, Federal Student Aid, http://studentaid.ed.gov/prepare-for-college/choosing-schools/types/international