The FAFSA form is one that parents are familiar with if they have a child that has entered college or is about to go to one. FAFSA is short for ‘Free Application For Federal Student Aid’ and is one of the most important aspects of getting the maximum student financial aid available. However, like many in-depth forms, the FAFSA can be confusing for any applicant, whether it’s the first time or the tenth.
Common Misconceptions about FAFSA
If You Have A High Income You Won’t Qualify
Although the FAFSA is considered a need-based federal program, having a high income doesn’t mean that there’s no point in applying. There are several factors that affect eligibility and overall income is only one of those variables. Also, many colleges won’t offer their academic scholarships or other forms of local aid without the FAFSA being completed. Because of this, it’s important to try and get the maximum student financial aid assistance possible by filling out this important form.
Your Taxable Income Doesn’t Matter
Although being high income doesn’t necessarily mean students won’t qualify for financial aid, it’s a common misconception to assume that their taxable income doesn’t matter at all in the assistance process. The FAFSA is a tool that judges the maximum student financial aid amount based off of the applicant’s estimated family contribution, or EFC, to their education. So, while being high income won’t disqualify an applicant, it can definitely affect how much aid is available.
One of the best ways to ensure that the prospective student achieves their maximum student financial aid amount is to have a lower taxable income. This can be done through waiting to sell stocks and bonds, asking employers to delay cash bonuses or raises, or holding off on taking money from IRA’s or 401(k)’s until after the financial aid process is complete for that year.
You Have to Wait Until You File Your Tax Return
Because college students are required to put their parents’ tax information on the FAFSA until they turn 24 years of age, many well-meaning parents wait until after tax season in order to file. However, this common misconception can lead to the student not getting the maximum student financial aid available.
FAFSA funds are released on a first come-first serve basis and so, it’s always best to file as soon as possible. Even if the parent uses their previous years’ tax return, they can change it when they file by using the IRS Data Retrieval tool through the FAFSA website. This tool is available as soon as three weeks after filing the current tax return and the change in income will rarely interfere with the FAFSA process.
The Parents Assets Are The Only Ones That Count
This misconception is an easy one to fall into because it’s the parents who are providing their tax information for the form. However, it’s actually the student assets that matter more when it comes to receiving the maximum student financial aid. According to research, a full 20% of student assets are considered in the analysis of financial aid eligibility whereas parental assets only make up 5.64% of assistance considered. This is because it’s assumed that parents have less money to contribute to their child’s education due to other responsibilities, such as running their own household. This means that having college savings accounts, such as a Uniform Gift To Minors Act, in the student’s name can actually hurt their chances of receiving the maximum student financial aid amount available. However, changing those same funds over to a 529 College Savings Plan or Coverdell Education Savings Account as a parental asset can increase the amount of financial aid available to the student. Keep in mind, however, that under current laws, this only works as long as the student is still considered a dependent on their parents’ tax forms.
The FAFSA Is The Only Financial Aid Resource Available
The FAFSA is a great tool for determining how much federal aid a student can receive, however, it isn’t the only one. There are many ways to help pay for college and the FAFSA is only meant to help target students that have the most need of financial assistance. However, if a child is sufficiently talented enough, financial advisers can offer enticing aid packages in order to persuade the student to come to their school. Also, work-study programs, federal subsidized loans, individual or state-funded grants, and other avenues are available for families who want to take the high cost out of a higher education.
Talking to a financial aid adviser is a great way to find the first financial step. Regardless of what financial aid tools are used, whether it’s the FAFSA or other assistance, having the right knowledge can make the process easy and affordable.