Source: News Tribune
It’s crunch time for families counting on loans and grants to pay for college.
Deadlines to fill out the FAFSA, or Free Application for Federal Student Aid, are around the corner and likely generating anxiety in households across the country.
The FAFSA is used to determine how much an applicant or his or her family should contribute toward education costs. Schools then use that figure – known as the expected family contribution – to determine how much financial aid should be awarded to bridge the cost of attendance.
Students who apply online at www.fafsa.ed.gov[http://www.fafsa.ed.gov] can get an estimate of their expected family contribution immediately. With a mail-in application, it may take two weeks or more.
Remember that it’s worth applying even if you don’t expect to qualify for need-based grants.
Before filing, here are five things you should know about the process:
1. Timing Matters
Deadlines for filing the FAFSA vary depending on the state and school. Some are as early as February or March, but filing promptly could pay off.That’s because many have first-come-first-serve policies for their limited pools of aid, said Jennifer Douglas of the U.S. Department of Education.
Deadlines for state aid can be found at www.fafsa.ed.gov/deadlines.htm[http://www.fafsa.ed.gov/deadlines.htm] .
2. Student Assets Count More
To avoid any unpleasant surprises, it’s important to understand how the FAFSA calculates your expected family contribution. The formula is complicated, but one of the more important rules to remember is that student assets and income are weighted far more heavily than those of a parent.
It’s too late now to strategize for a fatter aid package for the upcoming school year. But in the year ahead, consider using a student’s income and assets on education expenses before dipping into a parent’s funds. That will maximize the aid package offered for the following year.
3. Gifts Can Be Optimized
Financial gifts from friends and relatives are counted as student income in determining aid packages.
If you’re looking to maximize aid, ask friends and relatives to save financial contributions for the student’s senior year. Aid for each year is based on the student’s financial information from the previous year.
Another way to maximize outside help is to transfer the money to a parent’s checking account. This minimizes the impact of the gift on the aid package, because a parent’s assets aren’t weighted as heavily.
The same goes for 529 college savings plans; grandparents can transfer them to either a parent or student’s name.
4. There Are Financial Blind Spots
The FAFSA doesn’t factor in consumer debt so don’t expect any extra aid even if you’re swimming in credit card bills or auto loans. Paying down debt as soon as possible will only benefit you.
Another FAFSA blind spot? Retirement funds and pensions. They’re not counted as assets, so it makes sense to sock away money into them. In a sense, you could say the FAFSA rewards two tenets of smart personal finance – paying off debt and saving for retirement.
5. Whining Doesn’t Help
The expected family contribution can’t be negotiated with the Education Department.
That said, families can appeal to a school’s financial aid office for what’s called a professional judgment, or an adjustment of their aid eligibility. This is only an option if there are extenuating financial circumstance