FAFSA Time, Again

09/25/2017 10:36 am ET

A reminder to college students and their parents: FAFSA time has come around again. October 1st is the first day you can file your Free Application for Federal Student Aid for the school year 2018-2019 – to access more than $120 billion of Federal student aid, including work/study programs, grants, and scholarships.

This deadline applies not only to returning undergrad and graduate students (who must re-file the FAFSA each year), but also the students who will enter college as freshmen in the fall of 2018. Since most of this money is given out on a first come-first served basis, you’ll want to file the FAFSA without delay.

Here’s what you need to know:

  • Get prepared now. You can now go online to www.FAFSA.ed.gov and register to get your user name and password, so there are no filling delays. Students and parents must get separate IDs, and each must have a different email address. You’ll need driver’s license and Social Security numbers to register.
  • Income tax verification is easy. The IRS data retrieval tool is up and running again., allowing access to your most recent tax return to populate your FAFSA application. The tax return will be the one you filed last April 15th, for the tax year ending December, 2016. If there have been material changes in family income since then (ie., one parent lost a job) you must notify each school to which you apply.
  • Prepare to list schools on your FAFSA. You should list each school to which you might plan to apply. Here’s a hint: If you are applying to state schools, put their names at the top of your list. Many state schools have limited financial aid or early deadlines, and they start passing it out early. Showing that you consider them a priority might result in more financial aid.
  • Understand what income and assets must be disclosed on FAFSA. The family home and the value of retirement accounts and life insurance are NOT considered in the FAFSA process. But all money in cash, savings, and checking accounts must be disclosed, as well as all investments in real estate (other than the family home) as well as other assets such as custodial accounts must be included, along with all income.
  • Beware of scams. NEVER pay anyone to help you file the FAFSA. There is no charge, ever, for filing the FAFSA form.
  • Special consideration for children of divorced parents. Filing these forms can be a challenge for children of divorced parents. Frequently one parent refuses to get involved in the disclosure process. But information about both divorced parents is required only if they are still living together. Otherwise, you only need the income and asset information about the custodial parent, or the one who provided the most financial support in the past 12 months. This can get a bit tricky if the custodial parent is remarried, forcing the disclosure of the financial information of the step-parent, with whom the child lives. Don’t let domestic concerns delay filing, though.
  • Understand the aid formula. Not all income and assets are considered equally in calculating eligibility for financial aid. Assets owned by the student or in custodial accounts (NOT including 529 plans with the parents as custodian) weigh far more heavily against the family in aid calculations. You might want to re-purpose student assets before filing for aid.
  • 529 Plans and Grandparents. 529 plans with grandparents as custodian are NOT considered in the financial aid formula – until money is distributed from them and used to pay college expenses. At that point, the money that has been distributed in the past year is considered a n asset – weighing heavily against aid for the current year. Lesson: Don’t distribute grandparent-owned 529 plans until the very last year of college, when you won’t be filing for financial aid in the next year!
  • Start the scholarship search now. What if Federal financial aid is not enough? Check for free money at Scholarships.com and FastWeb.com. Applying early is a real advantage, and some have prerequisites that you can start working on now.
  • Understand private student loans. Finally, your family might have to consider private student loans to fill the gap. They can help, but have some drawbacks — including higher rates and fewer protections at repayment time. Sallie Mae is one of the largest private lenders for student loans. Spokesperson Rick Castellano reminds families that private loans to parents or students might be a last resort – but there is money available. However, unlike Federal loans, they do require a credit check. And typically students require a parental co-signer. Investigate at www.SallieMae.com.

Paying for college has turned into lesson 101 of high finance! Help is available from your high school guidance office and the excellent FAQ section at www.FAFSA.ed.gov. So don’t procrastinate in filing. That could be the most expensive lesson of all. And that’s The Savage Truth.

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