By John Raftrey And Lori McCormick
Ten Steps to Get Started with Financial AidUploaded: Sep 14, 2014
(Written by John Raftrey)
This blog inspired by a comment from a Palo Verde "Parent" posted last week!
The blog post is to get you started. I recommend you also buy and read line-by-line "Paying for College Without Going Broke," by Kalman Chany. Also each college handles financial aid differently. You have to contact each school individually, especially if you are divorced. I'd call them in case the website is wrong. You should plan to spend up to total 40 total hours trying to find your information and filling out the financial aid forms. Many people get their tax accountant involved.
This blog is for informational purposes only. You should contact your accountant and the individual schools to determine individual financial aid actions.
1.) What will you get? You may get money, even if you think you don't qualify. You have to go to the websites of every school the student is applying to and fill out the Net Price Calculator. Every school has one. It's the law. The Net Price Calculator will give you a very imprecise idea of how much your family may receive, but it will at least give you an idea of whether you can afford the school. The awards will be all over the map. Families are general surprised. Some are surprised they qualify for so few dollars, other families are surprised they qualify at all. You have to do the work.
2.) There are two main forms 1.) FAFSA and 2.) CSS/PROFILE . The FAFSA form is for all schools. The CSS/PROFILE form is for private schools. For most private schools you have to fill out both forms. Some schools have their own additional form.
3.) Deadlines. If your student is applying Early Decision or Early Action, the CSS/PROFILE form is due around November 1st. For Regular Decision the FAFSA form is online on January 1, 2015 and should be filled out within a couple of weeks. Financial aid is first come first served.
4.) Do an estimated 2014 tax return. Not a typo. This year's taxes. The whole thing. Both forms will want to know about your 2014 taxes, before you actually file them. In the case of Early Action/Decision, you will have to do your estimated taxes before the year ends! If there is a major difference between what you reported early to a school and what you eventually report to the government, you have to notify each school directly of the difference. Once FAFSA and PROFILE are submitted, they cannot be changed.
5.) Round up all your financial information. Bank statements, brokerage statements, the books for the family business, medical expenses, valuation of rental property. You have to report your retirement accounts on the PROFILE, but they are not used in the formula. The FAFSA does not ask for retirement accounts.
6.) Your House. The FAFSA formula does not take into account the value of your house. It only wants to know what your monthly expenses are on the house. The PROFILE formula does factor in the net value of your house. Don't panic. Most major private universities cap the value of your house as a multiple of last year's earnings. The cap recommended by the Section 568 Presidents' Group is 2.4 times last year's earnings. Most colleges will not tell you. But you can sort of figure it out if you fill out the Net Price Calculator. The Section 568 Presidents' Group is a consortium of select schools which have been granted an anti-trust exemption so they can talk about financial aid. Boston College is a member of the group and it appears they value your house at full market value. You can use the lowest defensible valuation of your house as if you had to sell it today with no improvements, no staging, no realtor serving cappuccino. Do not go lower than the federal housing index multiplier.
7.) Divorce. First, determine the student's primary residence, where they live a majority of the year. This is the custodial parent. This is independent of any legal wording in your divorce papers or your income tax filing. If the custodial parent happens to have the lower income, then you many get more financial aid. If the custodial parent has remarried, then the income from the new spouse has to be reported on the FAFSA and the PROFILE. If the new spouse has children, then you may be able to count those children as being part of the household. For FAFSA only schools, only the custodial parent and spouse fill out the FAFSA. However, individual schools may want to see the non-custodial parent's tax returns, or they may have their own non-custodial parent form. You have to check with each school. For PROFILE schools, frequently the non-custodial parent has to fill out the PROFILE non-custodial form and send in the two years of tax forms. If the non-custodial parent has remarried, then the income from the new spouse has to be reported and the new spouse's children may be part of the household number. If the non-custodial information is required by the school, then the non-custodial parent has to provide it. According the "Paying for College Without Going Broke," colleges are hesitant to grant an exemption for families who claim the non-custodial spouse is uncooperative, "This is the time to pull out the dirty laundry?alcoholism, physical or mental abuse, chemical dependency, abandonment, chronic unemployment, and so on." The uncooperative non-custodial spouse can always enter "0" for the question on expected contribution to college education.
8.) Student assets. This is where families can go bonkers. If you gave your child money to teach financial responsibility or to start a college fund, then the schools expect the child to actually spend their own money on college. FAFSA expects the student to spend 35% of their net worth on college. PROFILE expects the students to spend 25% of their net worth. If grandma wrote a big check for high school graduation, it would have been better if she had waited and written and even bigger check after college graduation.
9) When not to apply for financial aid. If you don't need it, or think you won't get financial aid, don't apply for it. There are some cases where colleges are "need aware" and give the acceptance to a "full-pay" student over a financial aid student. These are generally if the school has filled most of its class and is discussing which of a few students to let in to complete the class, or when deciding which student comes off the wait list. There a few colleges that require everyone to fill out a FAFSA to be considered for merit aid. Like everything else, check the school's website or call before you act.
9) Appealing your award. Circumstances change. If you didn't get enough financial aid at your top school, call them and tell them. Maybe they have some flexibility if they really want a student. In these discussions honesty is the best policy. Be ready to explain your situation in detail and point out facts they may have missed They know why you are calling. They know you may have a better deal somewhere else. The negotiation is different from buying a car. They will help you if they can, if they can't help you they'll tell you. If your financial situation changes dramatically after you file your forms, then write all the schools' financial aid departments and explain your situation. Include as much evidence as you might have. The sooner you get to them the better, because financial is a first come first served exercise. By April, they've already promised most of their financial aid money to somebody else.
10) Tips. 18 year old boys have to register for the selective service to be eligible for federal financial aid?.Schools use their "professional judgment," to make awards outside their formula. Even if the net price calculator is not optimistic, if they really want you they may exercise "professional judgement," and give you some aid?Some schools use GPA and test scores in their Net Price Calculator formula. If yours are high enough, you may get a merit scholarship without applying for it. ?.If you had "windfall income," one year that won't happen again, you have to write all the schools and tell them that year's adjusted gross income is not typical. It is best not to have any windfalls between January of sophomore year and December of senior year of college.