Posts tagged ‘FAFSA’

March 19, 2014

Same-sex marriage laws mean less college financial aid for some students

by Grace

The federal government’s recent recognition of same-sex marriage could lead to children of these couples receiving less college financial aid.  And it doesn’t matter if they are married or not.

The 2014 Free Application for Federal Student Aid or Fafsa—which calculates income, assets and family size—now collects financial information about parents “regardless of marital status or gender.” Since the Supreme Court ruled that Section 3 of the Defense of Marriage Act was unconstitutional, same-sex couples must report their marital status if they were married in a state where same-sex unions are legal but reside in a state where they are not, or even if they were married in a foreign country. If the student is one half of a same-sex marriage, he or she may also be considered to have independent financial means. “It’s a recognition of diverse family structures,” says Greg McBride, chief financial analyst with Bankrate.com.

The key factor for all parents is whether they live in the same home as their children.  Whether they are married or just cohabitating, both parents must report their financial information.

There are other new twists in this year’s application: If a student’s parents are unmarried but are living together, they’re now treated as though they were married. “This includes both divorced and never-married parents,” says Mark Kantrowitz, publisher of Edvisors.com , a network of websites about planning and paying for college. “And living apart means maintaining separate residences. Different floors of the same house don’t count.” Fafsa also requires applicants to answer questions about the parent they lived with most during the past 12 months and include a stepparent’s income. In all cases, both partners’ income and assets must be reported on the Fafsa, and all children are counted in household size….

… if the parents of the student seeking aid are unmarried and living separately, only one parent is responsible for completing the Fafsa.

In some cases this new ruling could increase chances of receiving financing aid. 

… However, in some circumstances, the recognition of two gay parents would increase a dependent student’s aid eligibility. (A dependent student’s need may marginally increase with the addition of a second parent because it increases the size of the household. If that increased need exceeds the amount by which the second parent’s income reduces the student’s need, he or she could be eligible for more aid.)

Related:  Divorced or absent fathers are let off the hook in paying for their kids’ college (Cost of College)

March 17, 2014

Can the FAFSA hurt a student’s chances of admission or financial aid?

by Grace

The simple act of submitting a FAFSA could harm an applicant’s chances for admission or financial aid at some selective colleges.

Some colleges are denying admission and perhaps reducing financial aid to students based on a single, non-financial, non-academic question that students submit to the federal government on their applications for student aid.

Millions of high school students and their parents probably have no idea this happens after they fill out the ubiquitous Free Application for Federal Student Aid. The form, known as the FAFSA, is used by nearly every American who needs help paying for college.

Here’s how it works.  Some schools have found that “the order in which students list institutions corresponds to students’ preferred college”.

When would-be college students apply for financial aid using the FAFSA, they are asked to list the colleges they are thinking about attending. The online version of the form asks applicants to submit up to 10 college names. The U.S. Department of Education then shares all the information on the FAFSA with all of the colleges on the list, as well as state agencies involved in awarding student aid. The form notes that the information could be used by state agencies, but there is no mention that individual colleges will use the information in admissions or financial aid — and there is no indication that students could be punished by colleges for where they appear on the list.

But the list has turned out to be very valuable to college admissions offices and private enrollment management consultants: They have discovered that the order in which students list institutions corresponds to students’ preferred college.

Now, some colleges use this “FAFSA position” when considering students’ applications for admission, which may affect decisions about admission or placement on the wait list, said David Hawkins, director of public policy and research for the National Association for College Admission Counseling.

If a student happens to place his favorite college toward the end of the list, he may be hurting his chances of admission.

So the institution is disinclined to use up a precious admissions slot for a student who is unlikely to enroll.

Does this really happen?

Explicit evidence was not provided in the Inside Higher Ed article on this, so I understand the skepticism expressed in the comments and elsewhere.  However, it’s understandable that schools would be reluctant to admit this practice.  Plus, I doubt the National Association for College Admission Counseling is creating this story out of thin air.  So I believe it happens at some selective schools, and as an applicant I would take this into account.

In case it’s true

One approach to avoid the risk of losing out on chances of admission or financial aid would be to submit the FAFSA one school at a time.  That way it removes all possibilities of  being dinged for the order of schools on the list.

It would be better if the government would just stop sharing the entire list with all the schools a student puts on the FAFSA.

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February 6, 2014

College 101 Infographic

by Grace

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College 101 Infographic from the Federal Reserve Bank of St. Louis has basic information about choosing a college and paying for it. 

Be educated and informed. Forecast your financial aid with the FAFSA4caster calculator. Find out what percentage of students received federal financial aid in 2012 and see the results of an April 2013 salary survey. Use a calculator to estimate the size of your monthly loan payment and the annual salary required to manage that payment. Learn about the top 75 college destinations with a link to the College Destination Index. Identify some of the reasons students select particular colleges…and more.


Short videos cover three topics:

  • Choosing a college
  • FAFSA
  • Financial aid

Related:  Ten questions to ask about college financial aid (Cost of College)

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February 4, 2014

Divorced or absent fathers are let off the hook in paying for their kids’ college

by Grace

The federal government lets most divorced or absent fathers off the hook in paying for college expenses.

Among the “five questions that trip parents up most of all”, Forbes includes one with an answer that seems particularly counterintuitive and even unfair to many families.

2) If my parents are divorced, which parent’s income and assets do I report on the FAFSA and CSS Profile?

For students whose parents are divorced, separated, or never married, the custodial parent’s income and asset information must be reported on the FAFSA and CSS PROFILE. The “custodial parent” is defined as the parent with whom the student lived with most during the previous year.  It does matter which parent claims the student as an income tax exemption.  If the student lived with each parent an equal amount of time, then the parent who provided the most support to the student must provide his/her information on the FAFSA and PROFILE.  If the custodial parent is remarried, the step-parent’s information must also be reported.

Parents and student should also be aware that colleges and universities may request information from the non-custodial parent to determine eligibility for institutionally-funded forms of financial aid.  If a college requires information from the non-custodial parent, this process will be explained in the financial aid application procedures.  Colleges that use the PROFILE typically collect non-custodial parent information via the CSS Noncustodial PROFILE Application. Other colleges may collect non-custodial parent information via an institutional application.

Several potential inequities arise from this treatment.

  • Shouldn’t non-custodial parents bear some responsibility for their children’s college costs?
  • Is it fair to make the custodial step-parent put his step children’s college financial needs ahead of his other children’s needs?
  • Isn’t it too easy to arrange for strategic sleepovers that would enable families to put the lower-income parent on the financial aid form to qualify for more aid?

Related:  Boost your chances for college financial aid with these FAFSA tips (Cost of College)

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January 29, 2014

Is your income too high to qualify for college financial aid?

by Grace

Mark Kantrowitz answers the recurring question about how much is too much income to qualify for college financial aid.

Question:

Is there a certain level of income and assets at which it doesn’t even make sense to apply for aid? I know this is not cut and dried, but before going through all the forms and submission expense, is there a formula where you can absolutely say that if your income is above x (say for a family of four) and your assets (outside of your primary home and retirement fund) are y, don’t even bother? - Stephanie

Answer:

The need analysis formulas are complicated enough that there is no simple answer to this question. The number of children in college can have a dramatic impact on eligibility for need-based financial aid. For example, a family with $100,000 in income and $250,000 in assets might have an expected family contribution (EFC) of about $29,000 with one child in college, but an EFC of $15,000 with two children in college. That won’t qualify for a Pell Grant since the EFC is more than $4,995, but it might qualify for subsidized Stafford loans or even institutional grants depending on the cost of the college. Financial need is defined as the difference between the cost of attendance (COA) and the EFC, so even a wealthy family might demonstrate financial need at a higher-cost college.

If family members have unusual financial circumstances, they may be able to qualify for more financial aid by asking the college financial aid administrator for a professional judgment review, sometimes called a special circumstances review or financial aid appeal. Unusual circumstances include anything that changed from last year to this year or anything that sets the family apart from the typical family. The college won’t make an adjustment for boat payments, but adjustments for job loss, unreimbursed medical expenses and high dependent care expenses (for example, for a special needs child or elderly parent) might qualify. Job loss is the most common reason for an adjustment. According to the 2011 College Decision Impact Survey, about one in six (17.6 percent) high school seniors had at least one parent lose a job in the last year.

Many colleges and scholarship providers require families to file the Fafsa to ensure that the student receives all the federal and state aid to which he or she is entitled. Families often overestimate eligibility for merit-based aid and underestimate eligibility for need-based aid.

Filing the Fafsa is also a prerequisite for low-cost federal education loans, like the Stafford loan and Parent PLUS loan. Almost half of Bachelor’s degree recipients from families with adjusted gross income (AGI) of $100,000 or more graduated in 2007-8 with student loan debt. More than two-fifths of students from families with AGI of $250,000 or more graduate with a Bachelor’s degree and student loan debt. More than a quarter of students from the top 1 percent borrow to pay for their education, perhaps because their parents want to ensure that the student has skin in the game.

Should you fill out the FAFSA if you are a high-income family?  It’s complicated, but keep this information in mind:

  • The FAFSA must be submitted to qualify for a federal loan.
  • Some merit scholarships require a completed FAFSA.
  • A family income that is higher than about $200,000 disqualifies most students for financial aid, but there are exceptions.

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January 28, 2014

A streamlined FAFSA has made applying for college financial aid easier

by Grace

The FAFSA form has been getting easier to complete.

In recent years, the U.S. Department of Education has simplified and streamlined the process. Nearly all applicants now complete the form online instead of filing out by hand a lengthy paper application. A feature that tailors questions to each applicant has reduced time. A tool used to retrieve Internal Revenue Service tax information online, rather than manually inputting the information, has shortened completion times as well.

The changes have led to a 50% increase in the number of students who completed the application over the last four years, Duncan said.

The form can usually be completed in about one hour.

The FAFSA “is required to tap the $150 billion in grants, loans and work-study funds doled out each year by the federal government, as well as other state and private funds”.

A reminder to complete the FAFSA as soon as possible after it becomes available on January 1:

“You do not want to wait until the last minute with financial aid — because when it’s gone, it’s gone,” she warned.

Related:  What forms do you need to complete the FAFSA? (Cost of College)

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January 8, 2014

What forms do you need to complete the FAFSA?

by Grace

Gather the documents and information needed to complete the FAFSA ahead of time.

To complete the Free Application for Federal Student Aid (FAFSA), you will need:

  • Your Social Security Number
  • Your Alien Registration Number (if you are not a U.S. citizen)
  • Your most recent federal income tax returns, W-2s, and other records of money earned. (Note: You may be able to transfer your federal tax return information into your FAFSA using the IRS Data Retrieval Tool.)
  • Bank statements and records of investments (if applicable)
  • Records of untaxed income (if applicable)
  • A Federal Student Aid PIN to sign electronically. (If you do not already have one, visit http://www.pin.ed.gov to obtain one.)

If you are a dependent student, then you will also need most of the above information for your parent(s).

As part of their personal finance education resources, the Federal Reserve Bank of St. Louis offers a “quick run down on some of the most common financial forms and documents that you’re likely to encounter”.

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November 12, 2013

This proposal to pay for college would make it too easy to cheat the system

by Grace

Among the Creative Solutions to Pay for College proposed by sociology professors Laura Hamilton and Elizabeth A. Armstrong is a radical change in defining the notorious Expected Family Contribution (EFC).  This idea has some merit, but would it let slacker parents slough off their financial responsibilities?

2. Use different measures of dependency. Need-based student aid and loan amounts are typically calculated using the federal government’s estimate for “expected family contribution” — which may not bear any relation to the parental assistance students actually receive. Undergraduate students are considered dependents unless they have children or are: over 23, married, a member of the military, an orphan, a ward of the court, an emancipated minor, homeless or at risk of becoming homeless. Dependents must report parental income on the Free Application for Federal Student Aid, and it is considered in calculating the expected family contribution. This poses a severe hardship for students who are financially independent. A measurement based on student reports of actual expected contributions would alleviate this burden. Given the financial constraints families face, there would be temptation to game the system. However, students and parents could sign a legally binding document stating their financial relationship (if any), and proof may be required to show financial independence through individual earnings in the first year of college.

This proposal addresses the frustrations felt by those unlucky students whose parents, even if they could afford it, will not financially support their children’s college education.  Yet for purposes of qualifying for financial aid, these students are stuck unless they fit into one of the narrow categories listed above.  For example, in cases of deadbeat dads, middle-income families deep in debt, or prosperous but anti-education parents, the children may not qualify for aid under current rules.  Often these children are essentially self-supporting, but cannot be considered independent in the application process.

Too many opportunities to game the system

While this idea seems reasonable in some respects, it also seems ripe for abuse.  Legal documents and tax records may screen out some would-be moochers, but loopholes would allow many to qualify for money.  Business owners in particular could easily set their kids up with “jobs” that would make them appear self-supporting.  And it’s easy to imagine a scenario where a “financially independent” student would regularly receive generous cash gifts and other  goodies from his parents while remaining eligible to receive financial aid.

No thanks.  The rules as they stand are onerous and imperfect, but I don’t believe the suggested solution is a better option.

Related:  Why does the EFC come as a shock to many parents? (Cost of College)

March 11, 2013

More colleges are becoming ‘need aware’

by Grace

Do your chances of college admission decrease if you need financial aid?  The answer is a qualified “maybe”.  According to Paul Sullivan writing in the New York Times, more private colleges are becoming “need aware”.

Still, the vote by the board of trustees at Grinnell, a liberal arts college in Iowa, reflects a broader trend in financial aid. The college counselors I spoke to this week said the majority of colleges had already downgraded their policies to “need aware” — meaning that the colleges accept most of their students without looking at their need for aid but will consider financial need for some percentage of the applicants. Others are already considering a parent’s ability to pay in many of their admissions decisions.

This issue matters the most for marginal students, who should understand that their ability to pay could factor into how attractive they are to a school.

As colleges continue to deal with losses in their endowments from 2008, they have less money to offer as financial aid….

So while more colleges are considering the financial need of their applicants, highly qualified students, no matter their finances, will still be admitted. And wealthier families, an education consultant told Paul, should realize that their children are competing against students of similar wealth.

Applicants can signal their ability to pay full tuition to a college, which may give them an edge in gaining admission.

… Admissions officials can usually figure out fairly quickly who needs aid and who doesn’t.

“It will be obvious because they didn’t file a financial aid form,” Belinda Stern, an education consultant on Mercer Island, Wash., said. “Some people are a little more brazen and want to make it clear to the college that they are willing to pay the full ride and come right out and say it.”

All this is irrelevant for most applicants since they have no choice because they simply need the financial aid, as this comment explains.

… Who ignores financial aid? Only the very wealthy. Only if you have saved over $200K per child. Only if your income is consistently over $250,000 or so.

The rest of us don’t have the option of “ignoring” financial aid. We fill out the FAFSA and the profile in the hopes that the financial aid gods will smile on us and offer our children some money for their education. We don’t wonder if the “full-pay” kids have a better chance of admission–we know they do!

My 3 children chose their colleges based on who offered them the best aid package, period. And they are doing fine.

January 15, 2013

Practical New Year’s resolutions for college parents and students

by Grace

The mother-daughter team of Julie and Lindsey Mayfield offer some money-saving New Year’s resolutions for college families.

For parents:

1. Complete the FAFSA: I bet few people look forward tofilling out the Free Application for Federal Student Aid, or FAFSA. Therefore, it’s something that’s easy to put off—or not do at all….

2. Prioritize communication:

It’s especially important to communicate about expectations: what you expect of your student and what he or she can expect from you, especially as it relates to financial support.

For students:

1. Use my meal plan to its fullest: Meal plans are prepaid, so it is in your best interest to use them wisely. Next semester, avoid eating out or off-campus as much as possible.

Those frequent purchases can add up …

2. Track my finances: Do you ever avoid looking at bank statements because you’re afraid of what you’ll see? I think this is the No. 1 way to overspend, and can spell disaster for college students who aren’t used to monitoring their own expenses. I am certainly guilty of this….

3. Find at least one new form of financial aid: The search for scholarships and financial aid is usually in full swing during the senior year of high school, but there are plenty of options available for current college students as well. I’ve found these to be less competitive than the more traditional incoming freshman scholarships, so they may be easier to attain.

A little extra cash could also be a great New Year’s gift to you and your parents—so start searching!

I found these ideas to be practical reminders to act upon at the beginning of the year.

Tracking finances
One absent-minded college student I know decided the best way to track his finances was to maximize the use of  his debit card and to stop using his parents’ credit card.  If he remembers to check his bank account periodically he is able to guard against going over his budget.  Meanwhile, his expenses are efficiently tracked by his bank.  He had previously discovered he has little restraint when using a credit card, finding it exceedingly easy to go over his budget on the many enticements that attempt to separate a young person from his money.  So even though his parents would like him to carry a credit card to use in emergencies or for big-ticket items like flight reservations, he decided to leave the card at home.

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