Posts tagged ‘FAFSA’

April 29, 2015

Estimating income tax information for early FAFSA filing

by Grace

It’s best to file your FAFSA early because colleges may run out of financial aid funds for later applicants.  But filing early often means that income tax information must be estimated and then later corrected.

Estimating your income may be a simple matter of using the previous year’s number and adjusting slightly.  Or, if your financial circumstances have changed considerably it may require more work.  FAFSA has an income estimator on their site that may be helpful.

After income taxes are filed, you must submit corrected information to FAFSA.  In most cases, you can use their IRS Data Retrieval Tool for a relatively painless process.  Otherwise, the process is more time-consuming because you will need to request that a copy of your tax return be sent to your school.

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 Alexandra Rice, “Taxes and the FAFSA: What You Need to Know”, U.S. News & World Report, March 30, 2015.

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April 13, 2015

Only some colleges count home equity in financial aid calculations

by Grace

While most colleges that use the CSS/Financial Aid PROFILE do include the value of your home in calculating eligibility for financial aid, there are some exceptions.

PROFILE Schools That Ignore Home Equity*

  • Bard College
  • Bucknell University
  • California Institute of Technology
  • DePauw University
  • Hamilton College
  • Harvard University
  • Princeton University
  • Santa Clara University
  • University of Virginia
  • Washington University, St. Louis
  • Whitman College

*This list was compiled last year, and changes may have occurred since then.

Additional information about how other PROFILE schools treat home equity can be found by clicking the link above.

Summary:

  • Schools that only use the FAFSA (Free Application for Federal Student Aid) to determine eligibility for financial aid do not use home equity in the calculation.
  • Schools that use the CSS/Financial Aid PROFILE to determine eligibility usually use home equity in the calculation, but often the amount is capped as a percentage of a family’s income.

Running the Net Price Price calculator for a particular college will usually show if home equity is counted, but the best way to be sure is to ask the school.

Schools can be flexible in awarding financial aid, and Lynn O’Shaughnessy reminds us of this important point:

By the way, how schools treat home equity can also depend on how desirable an applicant is.

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Lynn O’Shaughnessy, “Will Your Home Equity Hurt Financial Aid Chances?”, The College Solution, August 7, 2014.

January 19, 2015

Completing the FAFSA

by Grace

Students and parents often find the Free Application for Federal Student Aid (FAFSA) to be a little intimidating. The form asks more than 100 questions about family finances and demographic details. The FAFSA is slightly more complicated than the typical federal income tax return. Officially, the form should take less than an hour to complete, but most parents don’t have advanced degrees in economics. Some parents want help completing the FAFSA, because they worry that making a mistake on the FAFSA will affect their ability to pay for college, ruining their child’s life forever.

Don’t panic! Take a deep breath. Relax.

Edvisors offers an online Step-by-Step FAFSA Tutorial

… This step-by-step guide provides a tutorial overview of completing the Free Application for Federal Student Aid (FAFSA). It is based on the bestselling book, Filing the FAFSA.

The book is available for free download at the link.

The Federal Reserve Bank of St. Louis offers a video that guides you through completing the FAFSA.

FAFSA 101
Take a stroll through each screen of the online FAFSA to see what information you’ll need on hand to complete the application quickly and accurately.

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January 5, 2015

It’s FAFSA time again

by Grace

It’s time to complete financial aid forms for college, and doing it sooner rather than later can increase chances for a better aid package.

The new Free Application for Federal Student Aid, known as the Fafsa, will become available online on Jan. 1. The form is the starting point for students and families seeking federal aid, and is used by most states and colleges as part of the student aid process. The form collects financial and personal information about students, and their parents if they are dependents, to determine eligibility for scholarships, grants, work-study awards and loans. It must be completed every school year for students seeking aid.

Filing the Fafsa as soon as possible after Jan. 1 increases applicants’ chances of getting the best financial aid packages for which they are eligible. Those who file the form from January through March receive, on average, twice the amount of grant money as those who file later, said Mark Kantrowitz, publisher of the financial aid website Edvisors.com.

That probably is because many states and colleges have early deadlines. Connecticut, for example, has a Feb. 15 deadline for certain aid programs. Plus, some state grant programs distribute awards on a first-come, first-served basis. So waiting means that students may miss out on aid even if they qualify. (Edvisors offers a guide to filling out the Fafsa, available as a free download.)

The other commonly used college financial aid form is CSS/Financial Aid Profile.  The New York Times has more information, including some common questions and answers about the forms.

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Ann Carrnsdec, “It’s Almost Time to Fill Out College Financial Aid Form for Fall 2015″, New York Times, Dec. 29, 2014.

June 23, 2014

How is home equity treated for college financial aid?

by Grace

The short answer:

Your home equity will count on the CSS Profile, but not the FAFSA.

Michelle Kretzschmar of Do It Yourself College Rankings explains more.

Since each school decides if they use home equity in their methodology and how much to consider, how much home equity will affect financial aid will vary by institution. Mark Kantrowitz of  Fastweb, estimates that colleges cap the amount of equity (value of home-mortgage) considered at between two to three times annual income. Troy Onink in Forbes reports that  “home equity counts under the Institutional Methodology, but only up to 1.2 times the parent’s adjusted gross income (AGI) under the Consensus.”

When in doubt, ask the school directly.

If you want to know the actual figure, you’re best bet is to ask the college. According to Money Watch.com

If your home has appreciated a lot, ask private colleges how they factor in home equity when determining aid, advises Paula Bishop, a financial aid consultant in Bellevue, Wash. Their answers may differ dramatically. Some schools, such as Princeton University, ignore home equity. Others, such as Boston College and American University, include 100 percent of it as an asset.

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Troy Onink, “How Assets Hurt College Aid Eligibility On FAFSA And CSS Profile”, Forbes, 2/14/2014.

Michelle Kretzschmar, “Does home equity affect financial aid?”, Do It Yourself College Rankings, 11/11/2013.

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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