17 January 2006

Stuff Parents of College Bound Seniors Should Know

...in theory, before filing the FAFSA. This will be the first in a series of FAFSA-related posts. I will try to do one post per night until I am done, but I make no promises!

Your kid is headed off to college next fall, has applied to a dozen different schools, her younger brother is bringing you design plans from a local contractor to turn his sister's bedroom into something more his own...and you now realize that you will need to pay for this. Ugh. I wouldn't want to be you. As if the college admission process isn't daunting enough, the financial aid process is probably worse. The stakes are higher -- kids are trying to "game" the system to get into the same 25 colleges, so the colleges change what makes a candidate attractive, or at least their evaluation methods. The same is true with financial aid. More and more people are chasing after fewer and fewer education dollars -- and desparately trying to game the system to get their fair share. Well, what's fair is (a) debatable, (b) subjective, and (c) not at all a static metric.

There are some simple (and some more complicated) ways to help good, honest, hard-working people get as much benefit as they can from filing the FAFSA. Understanding what the FAFSA determines and what methodology is used is crucial in maximizing your potential to reap any benefits from filing.

The acronym stands for Free Application for Federal Student Aid. The form is free to file. In other words, there really is no excuse to not file. I have heard folks say that they don't want to file because they know that they won't get anything. Well, you surely won't get anything if you don't file. I have heard others say that they don't want to file because they don't want "them" to know how much money they make. Umm...the federal government is the processor for the FAFSA. They already know how much money you make. If they don't -- you have bigger problems.

FAFSA determines Expected Family Contribution (EFC). EFC is basically how much the government thinks you should be spending to send your kids to college. This may be a shock, but sometimes you and the government may not see eye to eye. You will receive a copy of your EFC, as will all of the schools to which you wish to submit this information. The colleges then use EFC to determine your eligibility for need-based aid at their institution and communicate that information to you. Offers of financial aid should be received from all schools to which your child has been accepted and you sent FAFSA information. The first key to getting the most aid is to follow all of the school's instructions and deadlines. Our school has a "priority deadline" for financial aid of March 15. That basically means that all students who file the FAFSA with the federal processor by March 15 will get the same equal access to available aid. That does not mean that students who do not file until after March will not get any aid, but the available pool of funds is usually greatest at the beginning. Find out the dates of all financial aid deadlines for the schools you are interested and make sure that you are done by the earliest of those dates.

Some folks claim that they cannot file the FAFSA early because they have not prepared their taxes for the previous year yet -- and do not want to because they owe money and don't want to pay until it is due on April 15. That claim is bogus. You do not need to have your taxes filed to prepare the FAFSA. You can file using estimated data, and as long as your family's financial situation did not change drastically, then your data from last year is a good starting point for estimating.

We need to operate under some presumptions. One is that people are honest in their dealings. Honesty is something that I would like to just take for granted, but the reality is that I have seen too many people trying to game the system resort to illegal/unethical/immoral means. The advice I have to offer is to those who wish to operate within generally accepted ethical and moral guidelines. If you don't think that you can discuss your FAFSA filing strategy with your clergyman (or your mom), then it is possible that you may be doing something that is not right. In other words, if your strategy involves maxing out your 401k contributions to reduce your AGI, you are probably OK. If you are planning on submitting falsified documents, then maybe not so much.

Part II tomorrow.

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