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Student Aid

FAFSA: What You Need to Know

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What You Need to Know About the FAFSA
Financing a college education can be difficult and it is oftentimes something parents are concerned about for years. However, the Free Application for Federal Student Aid (FAFSA) is designed to make paying for a higher education a little bit easier. The FAFSA takes a look at a family’s total income and determines how much money the child should need to pay for school. While it seems pretty easy, there may be a few things you’re missing out on when it comes to getting the most out of the FAFSA.

Here are a few things you may want to consider when you fill out the FAFSA:

Retirement Accounts

Retirements accounts (IRAs, 401ks) are not considered when you or your child fills out the FAFSA. Actually, during high school and while your children are in college is the best time to stock money away for retirement. The FAFSA only takes capital gains (income) into consideration when deciding how much student aid you can receive.

Different Financial Aid Packages

Sometimes, financial aid packages can vary greatly. It may be the decision between the number one school and the second choice when you see the financial aid reward packages. Even two institutions that are very similar in academic standing may provide you with two completely different packages. When it comes down to it, after filling out the FAFSA, you may have to make a decision based on money and not necessarily preference. You can also use better packages to negotiate terms with other institutions.

Negotiating Aid Packages

This point especially appeals to college athletes. Oftentimes, if you (or your child) receives a financial aid reward package that doesn’t cover everything or doesn’t cover enough, you may be able to negotiate your package. You don’t do this through the FAFSA website though, you would do this through the school itself. To do this, contact the financial aid office at the university that your family is taking a good look at and try and negotiate better financial aid. There’s an art to this, so be sure to put on your stern face when you go in for the meeting.

Savings Accounts

If you have a substantial amount in your savings accounts, you may want to start spending it down. This number (the number of dollars in the account) can significantly impact the amount of money you or your child will receive for student aid. You don’t have to spend it like crazy. Do things like pay down credit cards and other debt, prepaying your mortgage or even make a big purchase (car, new appliance, etc). If you do this at the beginning of the year before you file the FAFSA, it will greatly help the amount of student aid that can be received. The FAFSA generally only awards aid to families with $50,000 or less in assets.

Don’t Lie on Your FAFSA

The FAFSA is a government document so lying on the application can be considered a felony. Lying about any of your income or assets on the FAFSA can be punished to the fullest extent of the law. It is a form of fraud and is punishable with up to $20,000 in fines. You will also forfeit any of the financial aid received and could even receive jail time. Just don’t do it. Be honest about what you have and work with what aid you receive.

Photo: Flickr: Pictures of Money

FAFSA: Get the Most out of Your Federal Student Aid

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Getting the Most out of the FAFSA
You can now file your Free Application for Federal Student Aid (FAFSA) for the 2016-2017 school year. The FAFSA is used by college students (or prospective college students) to determine how much help they will be able to receive to attend school. Aid is generally broken down into grants, scholarships and loans. However, is there a true “method” to filling out the FAFSA to get more aid than other people? Maybe.

There are a few tips you can follow to make the FAFSA work better for you:

Use A Supplementary Letter

When you are filling out the FAFSA, the application asks you somewhere around 100 questions (it is time consuming). However, not many of these questions have to do with what is going on with your finances currently. The questions have to do with the prior year’s finances. This means things like a recent job loss, recent illness and medical bills are not taken into consideration. You can write a letter to the university in which you plan to attend explaining your current situation. This will require a third-party document as well (hospital bills, doctor’s note, layoff notice), but it can significantly help your likelihood of receiving aid.

Always File

Even if you don’t think you will get any kind of federal aid, you should file. If you household makes $180,000 or less a year, you will likely qualify for some type of student aid. If you do not file for student aid, you can be blocked from asking for it for a few years. This can be bad if you have a financial bump in the road and are not able to pay out-of-pocket for your education. Besides, you have to fill out the FAFSA prior to receiving any type of federal loan, so go ahead and fill it out.

Savings Accounts

If you have a savings account in your name (student’s name), move the money. FAFSA takes the student’s earnings, savings and income into consideration before their family’s. This means that if you have a college savings account, brokerage account or any other type of savings, it may be considered when the decision about your eligibility for aid is made. This can be avoided if parents can just move the savings into their account or start the college savings in their name instead of having a child-owned account. You can also just use the savings for the child’s freshman year in college so that the savings are no longer taken into consideration when filling out the FAFSA.

File Early

The earlier you can file, the better. If you can get the FAFSA filed before the end of January, that is best. Some schools (and even entire states) award federal student aid money on a first come, first serve basis. States like North Carolina, South Carolina, Kentucky, Illinois, Tennessee, Vermont and Washington have all handled federal aid disbursement this way. If you live in or go to school in one of these states, it is important to get your FAFSA in early because they will only disburse funds until they are depleted.

Complete The FAFSA

To be accepted for student aid, you have to completely fill out the FAFSA. You can’t leave anything out. If you leave information out, you will be prompted to re-do the application and it will take longer for your financial aid to be processed.

Photo: Flickr: Tax Credits