College
11 Student-Aid Traps to Avoid
You'll ace the FAFSA and maximize your free money if you watch for these pitfalls.
By Jane Bennett Clark, Senior Associate Editor, Kiplinger's Personal Finance
January 19, 2009
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If your kid is heading to college in the fall, you'll likely need to scrape together every penny you can get to cover the college bills. That means filling out the Free Application for Federal Student Aid, otherwise known as the FAFSA. The FAFSA gives your student a shot at state, federal and institutional grants as well as access to the Stafford, a federal student loan.
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But filling out the form is, well, a pain in the FAFSA, and if you make a mistake, you could hurt your chances of getting free money. Although most applicants manage the process just fine, you'll do well to read the fine print, pay attention to electronic prompts and watch out for these pitfalls.
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1. Waiting till your tax return is done. If you don't have all your tax information when you tackle the FAFSA, use ballpark numbers and update them later. “At many schools, aid is awarded on a first-come, first-served basis,” says Jennifer Douglas, of the federal Student Aid Awareness and Applicant Services. “The most common mistake is waiting too late to apply.”
2. Failing to list all household members. You can include any dependent children for whom you provide at least half the support, regardless of whether they live with you or how many tax exemptions you take. If you expect the stork to arrive within the next nine months, count the new baby, too. Even nonrelatives may qualify. "It's got to be people who live with and get more than half their support from the family," says Mark Kantrowitz, of FinAid.org.
3. Volunteering the wrong parent. If you're divorced, the parent with whom your child lived the most during the previous year files the FAFSA, regardless of who has legal custody. If your child splits the time evenly between the two households, go with the parent who contributed the most support during the previous year.
4. Confusing the meaning of "you." "You" always means the student, even if you, the parent, fill out the form.
5. Misidentifying names and numbers. Use names as they appear on the Social Security card, not nicknames, and be careful not to list your own Social Security number in the section that applies to the student, or vice versa.
6. Giving the stepparent a pass. If you're the parent filing the FAFSA, your current spouse's finances go on the form, not those of the child's other biological parent. Neither a prenup nor a divorce decree gets the stepparent off the hook.
7. Citing your adjusted gross income in the line for total income tax. This mistake, once common, happens less often thanks to a prompt on the electronic application that questions out-of-whack answers.
8. Reporting the tax you had withheld, not the amount you owe. Unless you used a crystal ball and a magic calculator to figure your withholding, the two numbers will differ at least a little.
9. Overstating your wealth. You're required to list assets as of the date you sign the FAFSA, not the end of the tax year. If you have a big expense coming up, pay it before you file; if you're expecting a windfall, file the FAFSA before the money arrives. Don't include the value of the family home, retirement plans, a farm that your family lives on and operates, or a family business with 100 or fewer employees. (The FAFSA instructions provide full details.)
10. Neglecting to hit the "submit" button. It happens. Don't let your work go to waste.
11. Forgetting to update the numbers. If you filed the FAFSA before your tax return, you'll need to update the information to match your tax form. The Federal Student Aid Administration sends a reminder to do so after April 15, but most of the free money will be gone by then. Fix the FAFSA as soon as you finish your taxes.
Reader Comments (6)
Posted by: sloan robbins at 01/19/2009 01:51:26 PM
Can someone explain, when a student is 18 or especially 21, is aid based on parents income? When do they become independent. My daughter wants two degrees and has gone through her college money with an extra year to go.
Posted by: mike at 01/19/2009 08:09:53 PM
Is she still on your tax return as dependent?
Posted by: Mark Kantrowitz at 01/19/2009 08:40:07 PM
Students become automatically independent when they reach age 24 as of December 31 of the award year. There are also other ways of becoming automatically independent, such as servicing in the Armed Forces, getting married (*before* filing the FAFSA, as midyear updates to the applicant's marital status are not permitted), having a dependent other than a spouse, being a graduate student, being an orphan, ward of the court or in foster care at any age since age 13, being an emancipated minor or in a legal guardianship, etc.
Posted by: AMen_CPA at 01/20/2009 02:17:06 PM
She needs to show she is supporting herself. She needs enough income to show reasonableness of self-support and a residience of her own. Her income, along with any financial aid should calculate to show that this would be enough to support her while in school. Then, she can argue an exception to the FAFSA rules.
Posted by: Jessica at 01/20/2009 03:12:32 PM
Granted that I meet no other requirement for being considered independent (ex. under 24, not in the military, etc.), does being in pharmacy school (considered professional school--I don't know if it's considered graduate school...) qualify me as being independent and therefore allow me to leave off my parents' financial info on the FAFSA? Thanks!
Posted by: M Fallon at 02/18/2009 03:41:00 PM
Unknown by most parents and students is that you can answer some FAFSA questions incorrectly and still have your application approved by Dept. of Education’s computer-based review. Those errors will reduce your aid award. Or you can make other inaccuracies and your FAFSA will be rejected. In the first-come, first-served world of student aid, rejection means less aid will be available to you after you correct the application and re-submit it for consideration. Either comb your FAFSA carefully, or use the services of a professional student aid advisor and FAFSA preparer who not only uses a computer program do check for errors but also carefully reviews each answer personally. To this great list, I'd add 2 more: Don’t include untaxed Social Security as income. The law changed this year. Reporting it will inflate your expected family contribution and lower the amount of aid for which you are eligible. Also, if you or a family member has had their job eliminated, you may be eligible to answer “yes” to the “dislocated worker” question. You need to meet one of four criteria on the day that you submit your FAFSA. Student Financial Aid Services reports that one in every 10 families it helps has a member whose job has been eliminated. Being a “dislocated worker” affects how your assets are treated and could even reduce your expected family contribution to zero.