FAFSA Tips for 2017; How to Get Maximum Federal Student Aid for College
Submitted by Reby Advisors | Certified Financial Planners | Danbury, CT on October 20th, 2017
The Expected Family Contribution is the outcome of the FAFSA application. The EFC is the minimum the government and college expect a family to pay per year for college. The deadline to submit the 2017/2018 FAFSA is midnight Central Time on June 30, 2018 but don’t wait until the eleventh hour! States and colleges may have their own cutoff dates. For some, the deadline could be as early as October, 2017. Also, financial aid at some schools is awarded on a first come, first serve basis, so fill out the FAFSA as soon as possible.
An applicant should have the following information available when they apply:
1. Social Security numbers for students and parents, or Alien Registration Numbers for non-U.S. citizens.
2. Federal Student Aid (FSA) ID – create an FSA ID online, which gives you access to Federal Student Aid’s online systems
3. Driver’s license or other eligible government ID
4. Tax returns for students and/or parents
5. Asset records such as bank statements and investments
6. Records of untaxed income, such as child support
7. Federal school codes for the schools you will apply to, available at ed.gov.
For aid consideration, it matters where the savings are. It’s more difficult to get aid if most of the savings are in the child’s name. Funds in 529 college savings plans are scored lower for aid purposes than money held in a child’s trust (UGMA/UTMA accounts), that is, in their name. So, keep as much money out of their name as possible.
In the fall of 2015, the President announced two major changes to the Free Application for Federal Student Aid (FAFSA) process. Beginning in 2017–2018, the first change is to begin application processing on October 1, earlier than in prior cycles, and the second change is to collect and use financial information from the tax/calendar year one year earlier than in the past. This means we are collecting the 2015 tax information for 2017–2018; NOTE: If a family is counting on financial aid based on their FAFSA application, income tax planning is a necessity. We have seen numerous examples of UGMA and UTMA accounts being liquidated during the FAFSA application period thus causing the child’s/parents income to increase substantially and limit/ eliminate potential financial aid. If there are assets earmarked for college with significant gains, they would have to be recognized prior to December 31st of the college bound student’s sophomore year of high school.
Additionally, bonus’, withdrawals from IRA/401k plans, and other taxable events should be reviewed prior to recognizing the income on a tax return within the FAFSA filing period. Conversely, if you’ve had a change in circumstances and income has dropped substantially, you can appeal directly to the college and they may consider a change in your income.
Similarly, grandparents should avoid contributing funds from a 529 plan to a student until their junior year of college as the contributions are includable as income for the student and could reduce aid by as much as 50% of the contribution.
A FAFSA application is required for each year of college you are applying for aid. A common misnomer is that just because your EFC in one year resulted in limited or -0- aid, that it will automatically be the case the next year. Many factors including having more than one child in school can impact your EFC positively. Suppose your EFC is $60,000 and child #1 goes to UConn with a tuition of $40,000. You will receive no financial aid through your FAFSA application. But the next year, child #2 goes to Vanderbilt. You would receive aid as the combined tuitions exceed your EFC.
The FAFSA is not the final word on aid. There’s nearly $4 billion out there in merit aid, which is not based on financial need. Ask colleges and outside groups for that kind of money, which doesn’t need to be paid back. And throw out the idea that high price tags will make college unaffordable. Private colleges and even large state university systems have aid available. You just have to ask for it.
This is one of several articles from our Fall 2017 Newsletter. Click below to download the PDF (no opt-in required).
