A beginner’s guide to applying for financial aid
By Andrew Housser
Are you – or is your child – going to college next year? Now is the time to hit the books – the financial books, that is.
Each January, the federal government releases its updated Free Application for Federal Student Aid (FAFSA). This form is the one-stop shop for college students (including prospective students) to apply for all types of federal government financial assistance, including loans, grants and work-study aid. In addition, many institutions use the FAFSA to determine how they dole out financial aid to students. Here are some basics of what you need to know about requesting financial aid for school.
1. File whether you think you will receive aid or not. Even if you think your family's income is too high to qualify for a grant, the FAFSA often is the gateway to receiving educational loans, such as Stafford Loans and Parent Plus loans. What's more, Finaid.com estimates that households earning up to $180,000 might qualify for some form of aid. Additionally, some schools require students to complete the FAFSA in their first year to qualify for aid in years to come. Even if you think you can pay tuition for all four years, you never know what the future might hold. Fill out the form now in case you need aid in a year or two.
2. Plan ahead. Before you begin the FAFSA, file your income tax return. If that is not possible, you can estimate numbers using a year-end pay stub and correct them later. Use the IRS Data Retrieval Tool to transfer your tax data automatically into your FAFSA. Filing online is quickest, but if you have no online access, you can file a paper copy. To file online, first get a personal identification number (PIN) at www.pin.ed.gov.
3. File ASAP. Some schools and states award financial aid on a first-come, first-served basis. Filing the FAFSA in January or early February ensures you meet deadlines. Check schools' specific requirements to be sure.
4. Use your assets. If your family has savings for children's education, keep them in the parents' names. Schools and the government require kids to use most of their assets to pay for their education. Parents are required to use less. But most financial aid decisions are based on parents' income; only about 7 percent of families have enough assets to affect their financial aid awards. If you have a large amount in savings, but not a large income, you might consider putting those assets to good use to benefit your entire family. For instance, before you apply for aid, think about paying off debt or repaying part of your mortgage.
5. Tell the truth. Providing false information on the FAFSA is a crime. Financial aid fraud can result in lost aid, monetary fines and even prison time – whether or not it results in more financial aid.
6. Aim high. If you are an outstanding student but your family's finances are weak, still apply to high-tier schools if you have the interest. Some elite institutions charge no tuition (and do not even require loans) for students from families earning less than $65,000 per year. Kids from families making $200,000 or less do not pay full price at many colleges.
7. Double-check. Be sure all information you enter on the form is correct. Fill out every field to avoid delays or being disqualified. If something does not apply to your situation, enter a zero rather than leaving a blank.
8. Check what other forms you need to complete. Many schools have other financial aid forms in addition to the FAFSA. Some schools use the CSS/Financial Aid Profile (due by Feb. 15) to distribute non-federal financial aid. The CSS Profile is in addition to the FAFSA. Complete both forms if your school asks.
9. Ask for reconsideration. Your financial aid package might not meet your expectations, or offers might differ widely. If so, follow up with the financial aid office. You can ask a school to reconsider your offer. Provide additional information via a letter, if need be – for instance, if your family recently faced a divorce, unemployment or large medical bills.
10. Do not go overboard. When evaluating financial aid packages, think ahead. Do not go into extreme amounts of debt simply to attend a certain school or program. Student loan debt can endure for many years, and if you run into financial trouble later, you will not be able to eliminate educational debt by filing for bankruptcy. Think about your expected career, income and loan payments before you sign on the dotted line. While it can be hard for college students to estimate future income, keep in mind that it is best to keep total debt payments (including student loans and credit cards) at or below 20 to 30 percent of monthly income.
For more information about the FAFSA, check out the free government website Completing the FAFSA.
|Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.|