FAFSA season begins on Sunday. New Year’s Day is always the first day that parents can file the Free Application for Federal Student Aid.
While it’s been simplified in recent years, the FAFSA still isn’t what I’d call a user friendly document and it’s easy to make mistakes. Paula Bishop, a CPA friend of mine in Bellevue, WA., who fills out a lot of FAFSA forms for clients, tells me that she’s never seen any parent complete a FAFSA application without at least one mistake. Yikes.
Here then are 10 FAFSA mistakes to avoid:
1. Don’t include retirement assets on the FAFSA. The FAFSA doesn’t care how much you’ve got in your IRA, 401(k) or other retirement accounts and doesn’t ask. The FAFSA does ask about cash, savings and checking accounts.
2. Don’t leave blank answers. If your intended answer is zero, write “0″ or not applicable. Leaving blanks can cause miscalculations and the application could be rejected.
3. Don’t enter the wrong income tax figure. Provide the federal income tax you paid or will pay based on your 2011 federal tax return — not the tax withholdings on you and a spouse’s W-2 forms.
4. List the most current marital status. You need to state what your marital status is on the day you sign the FAFSA, whether you are married, separated or divorced.
5. Don’t inflate your education. If both parents didn’t graduate from college, don’t list “college” as their highest education attainment even if they did attend some college. Plenty of schools treat applicants more favorably if they are considered “first-generation” college students.
6. Don’t forget to list the colleges. On the FAFSA form, you can include up to 10 colleges that your son or daughter has applied. The federal processors will send the pertinent FAFSA information to the schools on the list. You will need each college’s Federal School Code.
7. Don’t assume you won’t qualify for financial aid because your house is too valuable. The FAFSA doesn’t even ask if you own a house so the amount of home equity you have is irrelevant. The FAFSA does ask about second homes or real estate investments.
8. Don’t assume you won’t qualify for financial aid because you have too much saved in retirement. You could have millions stuffed into retirement accounts and it wouldn’t hurt your chances for financial aid.
9. Don’t type in a wrong Social Security or driver’s license number. Double and triple check these numbers.
10. Don’t assume that you can’t file the FAFSA without a completed 2011 income tax return. You can estimate your taxes in order to complete the FAFSA, but be sure to update the financial aid application after your tax return is complete.
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Thanks for the super info! I would add, don’t forget to get a FAFSA pin# for BOTH student and parent if you plan to submit the form online. I made that mistake once and there were some tense moments when my form was not accepted electronically.
Lynn: I love your blog. I too write about college costs, education and health. I’d like to share this video I made with your readers which might help them keep college costs under control. Here’s a link to my video:
http://youtu.be/Mqu_ITng-kc
Lynn:
Do you know if checking account balances associated with a parent’s S Corp need to be included in the FAFSA submission?
Hi Bill,
Sorry, but I don’t know the answer to that one. I would contact the toll-free number on the FAFSA website and ask. They should know. Good luck.
Lynn O’Shaughnessy
One fact some students and even some colleges don’t realize is that the federal government offers two options for preparing the required federal student aid application (FAFSA) – either do it yourself for free on the U.S. Department of Education’s Web site or get professional help from a fee-based service. (Similar to options for preparing income tax forms – only with up to 140 questions, the FAFSA is longer!) The largest fee-based FAFSA preparation service, Student Financial Aid Services (http://www.fafsa.com) provides FAFSA preparation services free to student from low-income families.
Accuracy Counts. Calculation mistakes can reduce an aid award even if an aid application isn’t rejected. For example, taxable income isn’t adjusted gross income. If parents have tapped into retirement funds, it should be added to either untaxed income or adjusted gross income, not both, or the Expected Family Contribution (EFC) will increase, and aid eligibility will decrease.
Not All Assets Count. Not only doesn’t a primary residence count as an asset for the FAFSA neither do retirement plans, small family-owned businesses, and the cash value of life insurance.
Dependency Surprises. Just because a student financially supports themselves, doesn’t mean they are independent under FAFSA rules. Many students are considered dependent until age 24 requiring parents’ income on their FAFSA. However, for children of divorced parents only the income of the parent with whom the child lived with the most during the past 12 months is counted.
Job Loss Relief. If a member of a household has had their job eliminated, a student may be eligible for more aid. Look for the ‘dislocated worker’ question and see if the family meets one of the four criteria. Dislocated workers’ assets are counted differently than others – typically helping reduce an EFC, which increases aid eligibility.
Job Loss Relief. If a member of a household has had their job eliminated, a student may be eligible for more aid. Look for the ‘dislocated worker’ question and see if the family meets one of the four criteria. Dislocated workers’ assets are counted differently than others – typically helping reduce an EFC, which increases aid eligibility.
Hi,
I just found out this evening, that my son (and his mother-my ex) intentionally filled out the FAFSA for 2011-2012, incorrectly reguarding income.
My ex and I divorced over 10 years ago, both having joint legal custody of our son, but she kept the tax exemption, and he spent about 60% of his time living with her. When he began applying for financial aide, in Dec. of last year, he called and got particulars about my personal info and income. Then after I filed my taxes in April, I took his mother a copy. It was my assumption that he was using her income, as well as mine, for his income information. Turns out, he was ONLY using mine, because I have children with my second wife, and it gives him a better aid package.
When he called tonight to get updated information, there were a few things that didn’t seem right in our conversation. I called him mom and asked her some questions, and again, her answers seemed off. So I got on the FAFSA website, and found out that he is being scandalous with his application. When I called him mother about it, she knew about it, but said I owed it to him.
Not only do I not want him lying about this to get more money, but I am concerned about my liability. I want my son to continue his education, but I can’t justify this. Any thoughts on what I should do now?
Thanks.
I saw that as a stepfather my income needs to be included becasue my stepson lives with us. What if my wife and I get divorced on paper so his dad will have to fill out FASFA? He makes probably 1/3 what I do and my wife doesn’t work. Will this work or this there a better way to avoid having to include my income?
Gary — What you are suggesting is highly unethical. I could never condone something like that.
Lynn O’Shaughnessy
I just graduated from high school and wish to go a nursing school. I realize that I need my parents income tax information. However, it has been 2 years since my last communication with my parents, and no one knows where they are. My grandparents asked if I could use there income tax info. because I live with them.
What should I fill in for my parents income tax info.?