1) Fill out the FAFSA
The Free Application for Federal Student Aid or FAFSA form is the form that most schools use to determine your financial need for purposes of calculating financial aid. Your “financial need” is the difference between a school’s Cost of Attendance and your Expected Family Contribution or EFC. Calculating the EFC is really what the FAFSA is all about.
Even if you don’t believe you will qualify for traditional need-based aid like the Pell Grant or the Minnesota Grant, you should still complete the FAFSA form. The FAFSA form is required for students who wish to participate in the Stafford student loan program. Completion of the FAFSA is also required in order to qualify for Federal work-study, as well as some grants, scholarships and other forms of financial aid.
2) Submit the FAFSA ASAP
If you are a high school senior or the parent of one, you should complete the FAFSA as soon as soon as possible after January 1st. If you don’t have all your financial information together, you can complete the form with estimated numbers and update it later.
Most students and parents, however, will complete the form as soon as they get their income and tax info, typically February or March. The sooner you can do it, the better.
The Federal deadline for the 2014-2015 school year is June 30th 2015. Corrections or updates need to be submitted by September 19th, 2015. While the Federal deadline isn’t until 2015, your individual state and the colleges you are considering may have their own deadlines. In Minnesota, the deadline is 30 days after the start of the term. Other states have deadlines as early as March 1st. For a list of all the state deadlines, click here: FAFSA deadlines.
3) Position Assets Accordingly
The FAFSA focuses primarily on income and assets of the student and their custodial parents. When you complete the form you are to use the previous year’s income and the current balance of your investments as of the day you fill out the form. If you are filling out the form for the 2014-2015 school year, you will use your 2013 tax information.
Assets are valued as of the day you fill out the form. These days most asset balances can be obtained online so an accurate number is not difficult to get. Since the FAFSA requires only that you use the asset value as of the day you fill out the form, you might be able to reposition some assets prior to completing the FAFSA and still stay within the rules.
For example, IRA assets are exempt on the FAFSA form. The time to make your IRA contribution would be before you fill out the FAFSA, not after. Since you can make a contribution for the previous tax year up until your tax filing deadline (usually April 15th), you may be able to make both a 2013 and your 2014 contribution prior to filling out the FAFSA.
IRA contributions are limited to $5,500 (plus a $1,000 catch up contribution if you are over age 50). A married couple could shift up to $22,000 to IRAs before filing out the FAFSA sparing these assets from the Expected Family Contribution or EFC.
Another strategy is to pay down debt or pay other large bills before completing the FAFSA form. Maybe now is the time to pay off your house or car. If you pay property taxes or insurance premiums or have other large bills due in the spring, pay them off before completing the FAFSA. This reduces the amount of money you have that is subject to the EFC calculation.
4) Get Help
There are several great free resources available to parents. To get an estimate of your EFC before filling out the form, check out the College Board. Their EFC estimator is a great way to see whether or not repositioning assets or paying down debt prior to filling out the FAFSA changes your number enough to make it worthwhile. For a direct link, click here: Big Future by the College Board.
If you need professional help, consider attending one of the Minnesota College Goal workshops. MN College Goal is a statewide volunteer program that provides assistance to students and their families when filling out the FAFSA form. To take advantage of MN College Goal you will need to act fast. Many of the workshops are held in late February and early March.
I don’t complete the FAFSA form for clients, but I can offer additional information and point you in the right direction. For a list of the resources and websites I use to stay sharp on financial aid and financial planning for college, email me with the subject line “financial aid blog post”.
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