So your child is off to college! Congratulations to both you and to your child! College is a big decision, in more ways than one. Part of the process is determining how the costs of higher education will be met. In recent years, more than 70% of college attendees relied on some form of financial aid to help pay for college, so it’s important to consider the availability of aid for your child.[1] To do so, the Free Application for Federal Student Aid (FAFSA) must be completed, and the sooner, the better! Applications are being accepted now for the 2015-2016 school year, and to maximize the likelihood of receiving aid applications should be filed as soon as possible.
What is the FAFSA? The FAFSA is the application required in order to apply for grants, loans, and work-study programs provided through the Federal government’s student financial assistance programs authorized under Title IV of the Higher Education Act of 1965. However, the information reported on the FAFSA may also be used by states, institutions of higher education, and even private financial aid organizations to determine eligibility.
We think that nearly every student considering college should have the FAFSA completed on their behalf. While all students won’t receive federal aid, most will receive some form of aid. In addition, there may be funds available about which you aren’t aware at this time but that require the filing of the FAFSA for qualification. Better safe than sorry! Completing the application isn’t complicated. A great step-by-step guide is available on the government’s Student Aid Website, https://studentaid.ed.gov/fafsa/filling-out. Deadlines do exist. The federal deadline for submitting the FAFSA online is midnight Central Time on June 30th. States and colleges may have different deadlines.
StudentAid.Ed.Gov provides a helpful explanation of the process of determining aid eligibility once the FAFSA has been filed:
“Your eligibility depends on your Expected Family Contribution, your year in school, your enrollment status, and the cost of attendance at the school you will be attending. The financial aid office at your college or career school will determine how much financial aid you are eligible to receive. The financial aid staff starts by deciding upon your cost of attendance (COA) at that school. They then consider your Expected Family Contribution (EFC). They subtract your EFC from your COA to determine the amount of your financial need and therefore how much need-based aid you can get. To determine how much non-need-based aid you can get, the school takes your cost of attendance and subtracts any financial aid you’ve already been awarded.”[2]
Here’s where planning can be helpful. Working with your advisor to adjust assets and income where possible prior to filing the FAFSA form can have a meaningful impact on eligibility by changing the Expected Family Contribution amount. Certain assets count against the student more than others. Consider the following facts as examples:
- Equity in a home, a business, insurance policies, and annuities are excluded from assets when determining EFC.
- Qualified retirement accounts, like IRAs or 401(k)s, are not counted in the EFC calculation.
- Assets owned by the student, including checking and savings accounts, CDs, and UTMA accounts result in a greater reduction in aid eligibility.
Great resources exist for helping parents understand the FAFSA and financial aid in general. Three great website are FAFSA.ed.gov, StudentAid.ed.gov, and SavingForCollege.com. We encourage you to be proactive in planning for filing the FAFSA form. It could have a significant impact over the term of your child’s college years.
[1] Source: National Center for Education Statistics, National Postsecondary Student Aid Study: Undergraduate Financial Aid Estimates by Type of Institution in 2011-12.
[2] https://studentaid.ed.gov/fafsa/next-steps/how-calculated