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.