TRUE or FALSE:
Savings for college under my child’s name will increase our financial aid.
FALSE: In calculating financial aid for a dependent student, the formula uses 20 percent of the student’s assets (after deducting allowances). The formula only uses 12 percent of a parent’s.
The ages of the parents are irrelevant in calculating financial aid.
FALSE: Under current rules, a significant portion of a parent’s assets is deemed “protected” from being used to pay for college. The amount protected is based on the age of the older parent, with the benefit increasing with age. Here’s an example of how that works. If a two-parent family has $100,000 in assets and the older parent is 55, $46,800 of the assets will be protected. This means the balance of $53,200 will be used for the calculation and factored at 12 percent (the parent’s rate).
A student’s income is so small that it is practically irrelevant in calculating financial aid while a parent’s income is the big factor.
TRUE with a CAVEAT: A student’s income is calculated at 50 percent, while the parent’s income is not factored, but is reduced for the calculations based on allowances for taxes and family size. If the student decides to work before attending college, it will have more of an impact.
Lower-income families and older parents are expected to pay less; higher-income families with younger parents are expected to pay more.
TRUE: The percentage contributions for parents vary depending on their economic status and age.
Once you’ve been denied aid it is pointless to fill it out the next year.
FALSE: If your income changes, the program changes or the number of children you have going to school changes, the likelihood of receiving aid increases. It is recommended that you apply each year.
“Start early. Oftentimes, money is offered to students on a first-come, first served basis. Those who start the process late may miss out on additional funding opportunities.”
- Stephanie Miller, Asst. Director
of Student Financial Services,
Jacksonville State University.
Before Senior Year- Ways to Maximize Your Aid:
Remember to keep your “base” year of adjusted gross income and total worth as low as possible in the year prior to your application—this will reduce your expected family contribution and increase your financial aid opportunities.
It’s never too late to use a 529 College Savings Plan
FAFSA puts less weight on these funds. It also has state income tax benefits.
Pro tip: If a grandparent owns the 529 plan, it won’t be used in the FAFSA analysis formula at all.
Make your big purchases now
If you are going to make big purchases like a new roof, do it the year before so that money is not counted as an asset. Keep in mind that adding
consumer debt will not help, but increasing your investment spending or business debt can mean more aid.
Take stock of your Assets
Assets excluded in the Expected Family Contribution (EFC) formula are: retirement plans, your personal residence, life insurance, annuities, personal cars and boats.
Plan your college spending
Since a student’s assets are assessed at a higher percentage than parents, plan to use student assets first. Also, keep in mind that the assets of a sibling are not calculated in the FAFSA equation.
Step-parent income is now considered in the EFC formula so this will potentially decrease amount of aid—we support marriage so please do get married, just realize that it will probably affect your EFC.
Be sure to consult a tax adviser before using any of these strategies. The information contained in this article is not given with the intent to offer legal or tax advice since the situation of each individual is different.
DOUBLE-CHECK FOR ACCURACY
The most common errors made when filling out the FAFSA include the student’s name and Social Security number not matching as it appears on the Social Security card and the date of birth. “FAFSA uses a variety of government systems to check for accuracy, eligibility and citizenship. If a student does not have correct information, or it is incomplete, they may have to start the process over prior to receiving any funding,” said Stephanie Miller, Asst. Director of Student Financial Services at JSU.
Have these handy when completing the FAFSA:
- Social Security numbers of students, parents and step-parents
- Federal Income Tax information of students and parents
GOOD TO KNOW
- FAFSA takes 30-45 mins to complete
- Requires your son to be registered for the Selective Service
- Requires dates of marriages/divorces
- FAFSA is FREE – if you are asked for credit card information, you are not on the official government page, www.fafsa.ed.gov
1. To ensure you don’t miss out on the maximum federal student aid available, when is the best month to submit your FAFSA?
2. What do you need to be eligible to receive federal student aid?
A. U.S Citizenship
b. Social Security Numbers
c. High school diploma or equivalent
d. All of the Above
3. Which of the following determines how much federal student aid you’ll receive?
a. Your expected family contribution
b. Your year in college
c. Your enrollment status
d. The cost of attendance at the college
you will be attending
e. All of the Above
4. How much of the student’s income does FAFSA consider?
5. Which of the following financial information is required on your FAFSA?
A. The value of your 401K
B. Credit History
C. Bank Account Numbers
D. None of the Above
Answers: 1. C 2. D 3. E 4. C 5. D