FAFSA 101

Financial aid is an option for many families to help pay for college. It’s money that is allocated to students in the form of a loan or awarded to them in the form of a scholarship or grant.

moving into dorm

Attending college can come with a hefty price tag. According to the College Board, the average cost of tuition for the 2016-2017 academic school year was $3,440 at public two-year colleges, $9,410 at public four-year colleges for in-state students, $23,890 for out-of-state students, and $32,410 for private four-year colleges.

So, how will you pay for college? One option for many families is financial aid. It’s money that is allocated to students in the form of a loan or awarded to them in the form of a scholarship or grant. Aid can be issued by the government, foundations, state agencies and schools. The money can be used to pay for tuition, books and supplies, room and board, and transportation.  

There is no shortage of financial aid. Each year, the U.S. Department of Education awards about $150 billion dollars of financial aid to 15-million students in the form of grants, loans and work-study. But in order to receive funds, parents and guardians must apply for it. A great place to start is the Free Application for Federal Student Aid (FAFSA), which is a financial aid application run by the U.S. Department of Education. The application is open to high school seniors from October 1st until June 30th. 

Filling out the online form can be overwhelming, or confusing, but here are few tips to get you started:

Be prepared

Before you and your student begin filling out the application you will need to be prepared with the following information:

  • You and your student’s social security number.

  • The student’s driver’s license number, if they have one.

  • Your tax forms from the last two years (IRS 1040, 1040A, 1040EZ) and your W-2 forms. If your student has filed taxes in the past, they will also need to submit their information. You might be able to import your tax information from the IRS website into the online application.

  • Any records of untaxed income available.

Filling out the form

When filing out the form there are student specific sections to be filled out and parent specific sections to be completed. If a section is color coded in green or says, “I,” “You,” or “Your,” it is referring to the student and they must complete it. Sections to be completed by a parent or guardian are always color-coded in purple. 

  • You can access the site at www.fafsa.gov  to complete the online application or request a paper application by calling 1-800-4-FED-AID, (1-800-433-3243) or 1-334-523-2691. If you are hearing impaired, contact the TTY line at 1-800-730-8913.

  • Create a Federal Student ID (FSA ID). This will be your unique identifier as you fill out the application. With the ID you are able to sign official documents online. The FSA ID can also be used to log on to other federal student sites like StudentAid.gov and StudentLoans.gov later on. Parents also need to create an FSA ID to complete their portion of the application.

  • Make sure that you answer each question accurately. While there are a lot of questions that need to be answered, each one is to determine your student’s eligibility for assistance.

  • List the colleges and universities your student is considering. Students can list up to 10 schools on the online application and up to four on the paper application. Each school that is listed will receive the FAFSA results to help determine how much financial aid your student could expect to receive from the school.

  • According to the FAFSA website, once you have completed the application online it will be processed by the U.S Department of Education in 3-5 days. If your family submitted a paper application it will take 7-10 days. After that, you will receive a student summary report (SAR). based on the information you provided, as well as an estimate of what your family is expected to contribute (expected family contribution or EFC) towards your student’s education. This report will then be shared with the schools your student applied to. If a student has applied to more than 10 schools, their SAR report can be sent to schools 11+ for financial aid. consideration, but won’t be sent automatically during the initial FAFSA completion like the first 10 were. Once the school has this information they will determine your eligibility for federal and nonfederal student aid and use that information to create a financial aid package, also known as an award letter for your student.

Keep in mind

  • If you need to make any changes to the application you submitted, you can do so by logging-on to the student aid site to correct or add new information. Only information that was incorrect can be updated and modifications to the parents’ reported assets cannot be made even if they’ve experienced a loss since they originally filed.

  • Each year that your student is in school you will be required to complete the FAFSA.

There’s a lot to keep track of and remember. In addition to all the information above, college financial aid expert Mark Kantrowitz tells parents to keep in mind these important tips:

  • Starting January 1st of your child’s sophomore year in high school, your income changes can impact your aid eligibility. “If you make more money, it can result in your child receiving less aid and vice versa.”

  • “If you’re going to sell stocks to pay for college, you need to do it before October 1st during your child’s sophomore year.  The reason is that once you sell your stock, the money will be shown as additional income and reported on your tax return, which can result in your student receiving less money.”

  • “Avoid artificially increasing or decreasing income information.” According to the U.S. Department of Education, lying about your income on the application can result in fines of $20,000 or up to five-years of jail time.

  • Pay attention to application renewal deadlines by visiting https://fafsa.gov/deadlines.htm

  • “Don’t take distributions from your retirement plans that year because it will be counted as an untaxed income on the FAFSA.”

  • “Pay down your debts before you file the FAFSA so that if you need to take out a loan for your student you can receive lower interest rates.”

 

For further assistance visit the Student Aid website. And before acting on information in this article, you should strongly consider seeking advice from your own financial adviser as each situation varies.