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

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)

Don’t wait too long to request college financial aid

SmartMoney‘s 10 Things Financial Aid Offices Won’t Say is a gold mine of wisdom for families seeking financial aid.  The entire list is good, but the first item is particularly timely.

1. “You waited until April? Sorry, we gave your money away.”

At first glance, the amount of financial aid available to students seems like a goldmine. According to the College Board, graduate and undergraduate students received more than $168 billion in aid during the 2008-09 academic year; more than $109 billion came from the federal government alone not including education tax benefits. But thanks to the down economy, competition for that money is expected to be tougher for the coming year. Don’t miss out on aid because of confusing deadlines for the Free Application for Federal Student Aid (FAFSA). Available at fafsa.ed.gov, the form must be completed to be considered for government grants and loans and both the government and prospective schools will review it. The federal deadline on the form is June 30, 2011, but schools’ financial aid deadlines listed in the colleges’ materials are as early as this February.

“Families need to submit their financial aid info as soon as they can after Jan. 1, preceding the student’s freshman year,” says Barry Simmons, director of university scholarships and financial aid at Virginia Tech. While the FAFSA asks for the previous year’s tax information a common reason parents postpone applying until April parents can estimate tax figures based on last year’s return and update them later.

A financial aid administrator posting on CollegeConfidential puts it this way.

Aid is limited, and when it’s gone, it’s gone. I would tell you that.

Another reminder that January is a good time to file your FAFSA.

File your FAFSA ASAP – financial aid is often first-come first-served

Do not procrastinate in filing your FAFSA because it could mean less financial aid.

“There are several states [and colleges] that have a first-come, first-serve basis where they have a limited pool of funds and when they run out of money, they stop awarding money,” says Finaid.org and FastWeb.com publisher Mark Kantrowitz.

The FAFSA form to use if you plan to attend college between July 1, 2012 and June 30, 2013 became available online on January 1, 2012.  The federal deadline for filing is June 30, 2013, but state and college deadlines are usually earlier.  For example,  the cut-off date for Connecticut is February 15, 2012.  You can check deadlines for all states by going to the FAFSA website.
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What is FAFSA?

The Free Application for Federal Student Aid (known as the FAFSA) is a form that can be prepared annually by current and prospective college students (undergraduate and graduate) in theUnited States to determine their eligibility for student financial aid (including the Pell Grant, Federal student loans and Federal Work-Study).^[1]

Despite its name, the application is the gateway to be considered for the nine federal student aid programs and the 605 state and most of the institutional aid available. The U.S. Department of Education begins accepting the application beginning January 1 of each year for the upcoming academic year. Each application period is 18 months; most federal, state, and institutional aid is provided on a first come, first served basis. Students are advised to submit a FAFSA as early as possible for consideration for maximum financial assistance.

Related articles

• Get ready for the new federal student aid application (cbsnews.com)
• “How Do I File the FAFSA in January When Tax Returns Can’t Be Filed That Early?” (centralscholarshipbureau.wordpress.com)