Now that we’re officially into the 2015-2016 FAFSA season, I wanted to share some questions that I’ve gotten about financial aid forms via my blog and my popular online courses for professionals and for parents. If you have your own questions, please leave them in the comment box below.
To avoid costly FAFSA mistakes, I’d recommend downloading an invaluable new guide for the 2015-2016 school year entitled, Filing the FAFSA, The Edvisors Guide to Completing the Free Application for Federal Student Aid. No personal information is required to obtain the free downloadable version of the Filing the FAFSA and it costs just $8.96 on Amazon to buy the page paperback version.
The book was written by Mark Kantrowitz, one of the nation’s top financial aid experts, and David Levy, the former financial aid director at Cal Tech.
Answering Your Questions
Here is a tiny sampling of the financial aid questions that I’ve been getting along with my answers…
Try as I might I still can’t get my hands around the whole financial aid picture. We completed the FAFSA and CSS/Financial Aid Profile and were amazed to see that the FAFSA family contribution amount was way more than we could actually afford! Does this mean that this is the lowest cost possible for schools with a larger price tag, merit scholarships included?
My son did apply to 2 private schools that use the institutional methodology, which I believe if admitted would give him the best financial packages. My husband makes a good salary, but we are not homeowners and do not have much outside of our retirement plan. Am I right about this? Lastly, my son did apply to 1 state school that we could afford without financial aid. At this point, we’re waiting to hear back from all the schools.
Lots of parents are surprised when they discover what their Expected Family Contribution is. If you don’t know what that term means, read one of my previous posts:
Experts have rightfully complained that the methodology used to generate EFC figures for millions of families is flawed. A family’s EFC isn’t always going to be fair. In fact, it’s quite likely that the EFC won’t pinpoint what a family can truly afford for college. And it’s no wonder. Congress decides what’s in the EFC’s secret sauce.
The formula does play favorites. The methodology, for instance, favors homeowners, aggressive retirement savers, small business owners, teenagers of divorce and rural Americans. That said, the biggest factor determining an EFC is usually the family’s income.
The FAFSA doesn’t ask if you own a home, which is great news for homeowners. Since you don’t own a home, this benefit won’t help you. The CSS/Financial Aid PROFILE does, however, ask about home equity.
Let’s say that you have an EFC of $40,000 and the school costs $40,000. That means you would not receive any need-based aid. Families with a high EFC, however, are eligible for merit scholarships from schools. For instance, the school might award a teenager a $12,000 merit scholarships, which would drop the cost from $40,000 down to $28,000. The vast majority of schools give merit scholarships to affluent students.
I wonder if you have any advice for someone who has very low current income but very high net worth. Our EFC is very high using the FAFSA (especially the Profile method) due to our taxable account balances and home equity. It is close to full cost of most colleges.
Are there any schools that would not consider our assets but only income? John
Most schools exclusively use the FAFSA and the FAFSA does not ask about home equity of a primary home so that’s not an issue.
In addition, if you have a lower adjusted gross income — below $50,000 — you can qualify for something called the Simplified Needs Test, which doesn’t require that you disclose assets on the FAFSA. To be eligible for the Simplified Needs Test, you must be able to file a 1040A or 1040EZ tax form. Sometimes with high valued assets, however, capital gains could require that you file a regular 1040.
At some FAFSA-only colleges, however, if you qualify for the simplified method, you will get federal aid (loans, work study and a Pell grant) for some of your award package since your EFC will be low, but for the school’s own institutional funds, (the good grant money that doesn’t have to be repaid), it might look at the assets regardless of the simplified method.
While you might be able to avoid disclosing your assets on the FAFSA, you wouldn’t be able to do this on the PROFILE, which delves deeper into a family’s finances. The PROFILE is used by 249 schools that are almost all private.
How about a post on the FASFA and financial aid for returning students?
There is a section of FAFSA which asks for the student’s financial information and has a couple of questions about work study and any scholarships received that “were reported to the IRS” or some such language. This worried us until we called the college fin aid department at Oberlin College and they explained that we did not need to fill in the scholarship received from the college itself, but we did need to report our daughter’s earnings (only a bit over 1k) in the federal work/study program.
Anyway, just an idea for you to consider.
Thanks for the idea Barry. All work-study earnings are taxable income and must be reported as such. Students are supposed to report work-study earnings in the FAFSA’s Additional Financial Information section. The good news is that work-study earnings are excluded when determining a student’s financial need.
And just as Oberlin told you, institutional scholarships from the college should not be reported on the financial aid form.
If you would like to discover much more about financial aid and how to find generous schools, I’d recommend signing up for my next Shrinking the Cost of College. If you want to be on the notification list when I release more information about the courses that start in February, please send me an email at Lynn@TheCollegeSolution.