The FAFSA: 7 Tips to Getting More Financial Aid
It’s FAFSA season, and parents and students everywhere are scrambling to round up their financial documents and fill out this important financial aid form which is the key to receiving financial aid for many – if not most – college students. For high school Seniors, the FAFSA is accepted starting January 1st. Filling out this form correctly – and on time – is extremely important, as some financial aid is given out first-come, first-served.
A recent article – “7 Legal Ways to Squeeze More College Aid From the FAFSA” – lists 7 helpful tips for properly filling out and submitting the FAFSA in order to maximize your financial aid eligibility – even if you’re not in a “need-based” situation.
Tip #1. Fill Out the Form Online
Although the FAFSA may be submitted in paper form, and some parents may find this easier, the reality is that many more mistakes are made on the paper form. While you can still put things in the wrong place if you fill it out online, it is generally faster and more accurate to do so. If you really prefer paper, go ahead and fill out the paper version, and then use this as a guide when transferring your answers to the online form, which will walk you through the answers and provide relevant explanations for each one, as well as importing your previous year’s tax forms for you. You just may avoid a few costly mistakes.
Tip #2: File As Soon As Possible
Some states have “first-come, first-served” financial aid programs, which tend to run out of money very quickly, so time is of the essence. Ohio is not one of these states, but each state and college can have a different deadline, so regardless of where you live, delays can definitely cost you! (You will need to check the websites, or call each college you are applying to, to find out their specific financial aid deadlines.)
The article states that, in general, those who file the FAFSA before the end of March receive twice the grant money as those who file later, so the sooner, the better. Don’t worry if you don’t have your 2014 tax information yet – you can always file using 2013’s tax returns, and then update your FAFSA later, but at least you will put yourself in line to receive aid in the meantime.
Tip #3: Know the Rules About Relationships
New rules put in place in 2014 have changed the way that parental relationships and income count on the FAFSA form. Previously, parents who were cohabiting but not married were allowed to list only one parent’s income on the form – often increasing the student’s eligibility for need-based financial aid.
The new rules state that if both parents live in the same house on the day the FAFSA is filed, both parents’ income must be counted. Therefore, if you are in the process of getting divorced, it would likely be best for one spouse to move out before you file the FAFSA.
Tip #4: Don’t Exaggerate Parents’ Educational Background
Some schools will give more aid to students whose parents did not complete college, so if a parent did not actually fully complete and receive a degree, be sure to only check the “high school” education box. This simple tip could end up getting you more financial aid.
Tip #5: If You Have Sufficient Cash, Pay Off Debts & Bills
This can be a sticky one, as if you have money saved for college, you probably don’t want to spend it down before college starts! However, the FAFSA form will ask about money you have sitting in unprotected accounts such as checking and savings, but they don’t care about your debts or bills. If you have a sufficient emergency fund, and still have extra cash on hand, you may consider paying down credit cards, car loans, or other bills, and then reporting the lower cash amount on the FAFSA. (Also see Tip #6 below.)
This can not only help you show more of a “need” when it comes to financial aid, but it can also free up cash flow that can later be used to help pay for college – not to mention the future savings you will have from paying off high-interest-rate debts – and it’s perfectly legal!
Tip #6: Shield Your Investments & Savings
One common mistake that many parents make is listing their retirement accounts in the investments section of the FAFSA. This can significantly hurt your eligibility for aid! Retirement accounts do not count against you in the Federal formula, and neither do a few other types of financial vehicles – if you know what you’re doing.
If possible, if you have a lot of money in non-investment accounts, or investments that are not inside qualified retirement plans, you may want to consider moving these into a Roth IRA or cash value whole life insurance policies. These vehicles are also not counted on the FAFSA, but they do give you a liquid place to shelter money that you can later use to pay for the balance of college costs. Your contributions to a Roth IRA (but not the growth) can be withdrawn tax-free to help pay for college. Both contributions and growth in a WL insurance policy may be used tax-free for college costs (or any other expenses), if properly structured. (Be sure to consult with us or another qualified financial advisor first, or this strategy could backfire on you.)
Tip #7: Be Strategic With Your College List
Many colleges now assess your college list on the FAFSA form to determine how likely a student is to attend their school. They usually assume the colleges are listed in order of preference, so be sure you list your top 3 colleges first! Some colleges will offer more aid if they see they are ranked second or third, in order to try to tempt the student away from their first choice. If you just list the schools randomly, you may not end up receiving as much aid at the college you most desire to attend, so put some thought into this listing before submitting your FAFSA.
The FAFSA is not something to take lightly – no matter what your income level, since some schools look at the FAFSA even when awarding merit-based aid – so make sure you take the time to be strategic, and keep these tips in mind when filling out your forms. If you need assistance, please feel free to contact our team for some guidance. You can reach us at 614-536-0246.