Marc R. Hill, CCPS, RFC asked:


As the high school years wind down, parents begin contemplating how they will pay for their children’s college tuition. For those who are tackling this question for the first time, and for some who are tackling the question for the second, third, or fourth time, the mere consideration is enough to turn one’s head prematurely gray. But, for those who receive good advice, gray hair can be postponed for a few more years.

Many parents turn to the U.S. government and the federal financial aid system to help find additional money to assist with college expenses. To determine the extent and eligibility for this supplemental money, families are required to fill out the Free Application for Financial Student Aid or the FAFSA form.

The FAFSA is used to determine the Expected Family Contribution (EFC), which in most cases is the starting point or minimum dollar amount a college anticipates a family to contribute toward their child’s education in any given school year. Once a preliminary EFC is determined, financial aid packages are constructed for prospective students by the various colleges and universities.  

The EFC calculation is primarily based upon an assessment of parental and student income and asset values. The income and assets attributable to the student are assessed at a higher rate than those of the parents. Families with more money have a higher EFC than those families that are less well -off who are not expected to contribute as much.

A higher EFC also indicates a student does not need financial help in the form of scholarships and other types of gifted aid, which do not require repayment. Instead, the student may only qualify for loans and other forms of assistance that require repayment and can result in thousands of dollars of interest charges.

Worried about skyrocketing college costs, parents of high school seniors often suggest that grandparents make donations to Junior’s college fund in lieu of holiday gifts.

If they’re financially able to do so, most grandparents happily comply. After all, one reason they’ve accumulated their wealth is to help younger generations achieve success, including going to college. Unfortunately, their generosity may devastate their family’s finances.

What most parents and even their financial planners don’t realize is the timing of financial gifts is critical in determining how much their family pays for college. Doing this incorrectly not only could cause your child to lose scholarship and other forms of gifted aid, but your family will also be expected to contribute more towards your child’s educational costs.

When cash gifts are given to high school seniors for Christmas or Hanukkah, the money is in the child’s name and bank account when the family completes the Free Application for Federal Student Aid (FAFSA) in January. Hence, this gift is assessed at the child’s higher rate.

The bottom line?  The FAFSA considers the initial gift given in December as “untaxed income” and increases your Expected Family Contribution by fifty percent of the gifted amount.  Additionally, since the money is in the child’s bank account on the day the FAFSA is signed in January, it is now considered an asset of the child increasing your EFC by an additional twenty percent of the gifted amount.

In total seventy percent of grandma’s generous gift is swallowed up by the financial aid system without you even knowing it. The good news is that you can avoid these painful consequences by ensuring that your gift is given at the right time and in the right way.

Saving money is only one consideration when putting a child through college. To fully leverage your educational investments, you have to understand how the financial aid formula will be affected by how and when you use your investments. The choices you make could cost or save your family tens of thousands of dollars.

Poly Muthumbi asked:


In order for a student to qualify for federal sources of financial aid he/she must fill a FAFSA (Free Application for Federal Student Aid) form which in turn gives a feedback of student aid report about what his/her family is expected to contribute towards the student’s education. But just before filing out this form there are very sensitive and important conditions that a student must adhere to without a miss.

Do not blindly fill FAFSA form because there are so many documents and information you are expected to have at hand. Therefore, you need to get more information on what is required first, the conditions you should expect and what you should carry with you. Another key issue is the need to discuss this with your family, your friends or an adviser who would be of big help. This way, filing out FAFSA form will not take ages and still the information given is accurate.

I am insisting on this because the information submitted will determine eligibility for a federal financial aid. Make sure you understand every single detail in the FAFSA form. It is advisable that you have a printed copy. In this copy try and fill in the details as required. If this is done there is assurance of clean submission when it comes to filing the online form or any other hard and final copy you intend to submit.

Once you are settled on all the information needed for FAFSA form, then it is time to apply. Before starting, it is important to note that it is a long process and a student needs to have patience especially while filing in the details. Some pages contains a save button such that you can save to prevent retyping in case of anything. Again, try and be accurate because errors can delay the process. After all the patience and hard work on filing out this form eventually you need to submit it. After this you will receive a confirmation about submission success as well as the part of education covered by the federal financial aid.

Remember that a student needs to apply for FAFSA every year. Before I end this, it is good a little advice is healthy too. Apply for FAFSA earlier enough because it is a process and all your information must be cross checked before you receive a confirmation. You would not want this to happen when it is too late or in a rush, do you? This way there is assurance on receiving financial aid and your education will not be affected.

We all have a lot to appreciate the available financial aids for giving us opportunities to go for college and university education. Thanks to them and not to forget FAFSA financial aid program that is turning around the lives of many. Atleast the Future is bright for us! So be on the look out for this information and you will be the end beneficially.

Poly Muthumbi is a Web Administrator and Has Been Researching and Reporting on Student Loan Consolidation for Years. For More Information on FAFSA Financial Aid, Visit Her Site at FAFSA FINANCIAL AID

Jeff Mictabor asked:


NextStudent, the Phoenix-based premier education funding company, recommends that you submit your Free Application for Federal Student Aid (FAFSA), as close to Jan. 1 as possible because, although official deadlines for submitting the FAFSA vary from state to state, disbursement of federal aid is limited and awarded on a first-come first-serve basis. Students and parents should find time before the new year to collect all the information they need to complete the FAFSA so they can be prepared to submit as soon as possible and increase their chance of receiving need-based federal student loans.

The Application Process Made Easier

Students should visit http://www.fafsa.ed.gov/fafsaws78bw.pdf to get tools that will help them complete the FAFSA, including the pre-application work sheet. Although not part of the official application, this work sheet helps students and parents gather all the information they need to complete their application online (and offline, for that matter), including Social Security numbers, driver’s license numbers, W-2s and Federal Income Tax Returns.

If families have not filed their 2006 tax returns by Jan. 1, they can estimate their income as accurately as possible and then make corrections to their application at a later date by going to http://www.fafsa.ed.gov/FOTWWebApp/complete014.jsp

 

Online Advantages

The U.S. Department of Education recommends that students fill out and submit their FAFSA online. Results are received faster than submitting by mail, and the Web version automatically checks the application for errors before submitting, which decreases the chance that it will be rejected due to missing or incomplete information.

When submitting the FAFSA online, the Department of Education requires that the application be signed electronically. Students must apply for a PIN (Personal Identification Number) that serves as the electronic signature. To receive a PIN, users can go to http://www.pin.ed.gov. 

Federal Aid Confirmation

Several weeks after a student submits the FAFSA online, that student and the colleges indicated on his or her FAFSA will receive a Student Aid Report (SAR) from the Department of Education. Colleges use that report to determine a student’s financial aid eligibility. It is important for the student to double check the SAR to make sure there are no errors. If there are errors, changes can be made online by going to the corrections link mentioned above.

After a student finds out the types of federal student loans for which he or she qualifies, it then is a good time to look into applying for Stafford Loans, PLUS Loans or Graduate PLUS Loans.

NextStudent’s Federal College Student Loan Programs

NextStudent is a federal lender that can help students and their parents secure student loans for college. Almost every student qualifies for an unsubsidized Stafford loan. It is easy to apply for NextStudent Stafford Student Loans because there are no credit checks, payments are delayed until after graduation, and the interest rate is a low 6.8 percent. 

Other incentives offered by NextStudent include: 3 percent cash rebate on the remaining principal balance after 30 consecutive months of on-time payments when repaying using Auto-Debit, .375 percent interest rate reduction for using Auto-Debit for repayment, and a 2 percent upfront cash rebate.

It is important for students to submit a FAFSA because not all federal aid programs are need-based. When students submit early they put themselves in line to obtain the federal student loans to help pay for their higher education, and NextStudent is there to help with an array of federal student loan benefits and incentives.

 

NextStudent believes that getting an education is the best investment you can make, and it is dedicated to helping you pursue your education dreams by making college funding simple. Learn more about student loans at http://www.nextstudent.com/.

Reecy Aresty asked:


To ensure their children’s success in today’s intensively competitive world, parents are faced with the absolute necessity of paying for a college education. As students approach the high school years, it is understandable why so many parents feel the stress to financially prepare for tuition and related costs as they have not only gone through the roof already (Boston Univ., $51,000+), but continue to increase as much as 15% ever year! With no relief in sight, how can a college or college-bound family survive?

Contrary to popular belief, much of the anticipated debt can be legally eliminated if the appropriate action is taken at the proper time and before it is too late. Help is on the way in the form of proven financial strategies that make virtually any college affordable.

For example, most families are unaware of the fact that students have no asset protection allowance in the financial aid formulas. For college year 2007-2008, students will lose 20% of every dollar they have in cash, savings UGMA & UTMA accounts, stocks, bonds, savings bonds, mutual funds, and the like.

Parent assets are subject to a different formula and school selection is a key factor in ultimately determining the amount of financial aid. There are two categories of schools:

Category 1 includes a few select state colleges plus approximately 225 elite private schools. In addition to the Free Application for Federal Student Aid, (commonly known as the FAFSA), they also require the CSS Financial Aid Profile (FAP).

Those who find the FAFSA difficult will undoubtedly regard the FAP as a nightmare, and pity the poor family who’s divorced, separated, or owns a business or a farm. Such families are required to complete an additional form, The Business/Farm Supplement (you’ll need your accountant), and/or The Noncustodial Parent’s Statement (be nice to your ex). These colleges take into account all of the above plus home equity, Coverdell Education Savings Accounts (Education IRA’s), the refund value of Prepaid Tuition Plans and 529 Savings Plans.

Category 2 schools (all the rest), only require the FAFSA and exclude the value of the primary residence or a farm, provided the family lives on it.

Parent assets are subject to a 5.6% annual assessment over their allowance, which increases with age. The asset protection allowance for a two parent family with an older parent of 48, is $45,000. A 45 year old single parent is only allowed $19,700.

While this is certainly cause for concern, it is not cause for alarm. The good news is that with proper asset repositioning, parents and their students can appear penniless in the blink of a financial aid officer’s eye by legally repositioning their money into financial vehicles excluded from the calculations.

Once accomplished, repositioning makes it possible for families with students already in college to re-file their financial aid forms and qualify for additional aid for each of the ensuing years.

Note: Even more money can be saved when implementing income planning strategies. As the formula for parent income is much more complicated and not germane to this discussion, I have addressed it in one of my other articles.

The following illustrates exactly how student income affects financial aid:

1. In the financial aid formulas, students have a $3,000 income protection allowance, but for every additional dollar earned they lose 50 cents in financial aid:

Example: $5,000 earned – $3,000 exempt = $2,000 subject to the 50% assessment = $1,000 lost in financial aid.

Tax consequences: The $5,000 earned is subject to 7.65% in social security and Medicare resulting in an additional $383 lost!

If the student has larger earnings, it looks like this:

Example: $8,000 earned – $3,000 exempt = $5,000 subject to the 50% assessment = $2,500 lost in financial aid.

Tax consequences: Of the $8,000 earned, $5,000 is exempt leaving $3,000 subject to 10% federal and $8,000 subject to 7.65% social security and Medicare = 300 + 612 = $912 lost.

2. In the above example, let’s assume the student banked $5,000 and listed it on the FAFSA. The student would lose an additional 20% or $1,000 just for having it! Of the $8,000 earned, the total amount of financial aid lost in taxes and assessments would equal $4,412, or 55%!

3. Even if the student has no earnings but will attend one of the elite private and/or state colleges that require the FAP, there will still be an automatic income assessment of $1,000! However, this can be avoided – if you know how.

In order to receive maximum financial aid without the slightest hesitation on the part of a financial aid officer, income planning and asset repositioning must be completed no later than Dec. 31st of the 11th grade, or no later than Dec. 31st of the 10th grade if the student is applying to an FAP school.

Other strategies which have literally saved families millions of dollars over the years include:

· The ambiguous noncustodial parent strategy, which has reduced the cost of college by as much as 90%;

· The winter clothing allowance, which has saved students from southern states attending northern schools as much as $2,600;

· The “no work” work-study award, which has been worth as much as $8,000 over 4 years;

· Strategically negotiating for the best possible financial aid package, much like wheeling and dealing for the best price on a new car, has produced incredible results; and

· Professional Judgment, which few families are aware of, comes into play when there has been a significant change in family income, assets, marital status or health.

In order to win the college funding game (which repeats itself every year), a family must have the most up to date information, precise timing, persistency – and/or professional counseling from an expert in income planning and asset repositioning to do battle in the arena the College Funding Process has become…

michael_leung1987 asked:


I am a 20 year old dependent.
I have 2000dollars to invest in stocks.
However, I do not have any jobs. Therefore I have no income.
So, the only possible income for me right now is investment income.
I want to ask. For having 1000usd or 2000usd with scottrade, how much money will be affected for my fafsa grant?

monty asked:


I am in the very bottom range as far as income. I am wondering about an estimate of how much money FAFSA might give me since I am a Sophomore student at a university. Please don’t give me the website to FAFSA because that didn’t help me.

sinkohiosink asked:


I received my W-2’s and immediately filed my FAFSA that morning. Considering that they’d been accepting FAFSA applications for the Fall semester since the 1st of January, was the 31st too late to maximize my potential federal assistance?
My taxes were done before my FAFSA.

Gazhan asked:


I didn’t apply for FAFSA aid this year (figured I wouldn’t get anything since my parents make about $110k a year), and I kind of regret doing so. My parents also felt uncomfortable about filling out all of the personal information. I was planning to file a FAFSA next year just incase, though, and I was wondering if you can file for a FAFSA as a college sophomore? Is the FAFSA a “by the year” thing or is it for four years?

cotourby asked:


I’m a senior in high school, and I desperately need money for college. I’m planning on applying for financial aid from FAFSA, but I’m worried it may be too late. Does anyone know when the absolute latest time to apply is?

NUnum1 asked:


My state FAFSA deadline was April 1 but I’ll definately be able to get the federal application done in time. I start grad school in a month. If I filled out the FAFSA now am I in danger of not getting the funds in time?