Filing Your FAFSA Form – Some Tips

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Submitting Your FAFSA Form: Summary Review

Over the past couple weeks, we have posted two articles about submitting the FAFSA form for student financial aid.  We had you download the paper application as we demonstrated line-by-line the information required for the application.  You are now ready to submit your FAFSA form electronically.

The FAFSA form is a U.S. Department of Education form that the student (and parents of dependent students) must file in order to qualify for federal student aid. It is used by colleges to determine your financial aid eligibility. You can submit the FAFSA form anytime after January 01 for the year you plan to attend school.

View our postings for information:

Ready to Submit

If you completed the paper application using the required documentation, you are ready to submit your FAFSA form electronically.  An electronic submission is processed much faster than paper submission.  You can save your input and return later if you need to gather more information. 

To submit your FAFSA form online:

  1. you must first file a PIN for both the student and parent of dependent students
    get more information about PIN
  2. you must have available documents that will be needed for the FAFSA form submission.  If you completed the paper application in our exercise, all of that information should be ready for filing, including your school codes:
    see required documents for FAFSA form filing
    view school codes
  3. you can submit your FAFSA form online:
    submit your FAFSA form online
Who Must File the FAFSA Form
  • Every student who is requesting college financial aid.
  • Parents of “dependent students”.
  • “Independent students” will file on their own behalf and their spouse, if married. Parents of “independent students” do not need to file.
  • Use this dependency status worksheet to determine whether you are a “dependent” or “independent” student.

Filing Secrets

File Early:

File your FAFSA form as early as possible.  Any aid awards, such as scholarships, will need to be reported as aid to the student on the FAFSA form if the aid has been awarded on or before the date you file your FAFSA form. 

The goal is to show little income to the student.  So if you file the FAFSA form January 15, and the scholarship is awarded the student on February 01, you don’t have to report it since your FAFSA form has been submitted and processed. 

On the other hand, if you file the FAFSA form mid-February and scholarships are being awarded to the student in January, the student will need to report the scholarship aid on the FAFSA form.  This is additional aid to the student that will be reported.

Additionally, many school and state aid agencies have submission deadlines for financial aid.  You don’t want to miss those deadlines by filing late.  Check state aid submission dates. 

The student should have little to no assets

Assets in the student’s name will be assessed at 20% versus the parent’s assessment rate of 12%.  This means that the student who has an asset (such as a stock or mutual fund) that is valued at $10,000 for example, 20% of the asset value ($2,000) will be used to determine the student’s eligible contribution to financial aid.

TIP:
Assets that are not included in the assessment are non-education IRAs.  

You can make withdrawals from your IRAs for qualified higher education expenses without having to pay the 10% additional tax.

You will owe income tax on at least part of the amount withdrawn, but you will not have to pay the 10% additional tax on early withdrawals.

More information can be found from the IRS web site: http://www.irs.gov/

See your tax advisor for this type of investment strategy.

Reduce Your Liquid Assets

Parents need to reduce their liquid assets in order to maximize the aid contribution for the student.  Liquid assets include cash, savings, and money market account balances.

TIP:
Now who wouldn’t have savings in the bank?  But if you have $10,000 saved for college, those savings will be assessed at 12% towards the contribution to education.

How to reduce that amount? Use the Bank Equity Program to manage your money.  The Bank Equity Program can be used as your college money account that is not reported in your FAFSA form:  see our bank equity program for college

Reduce AGI

Parents and students should reduce there Adjusted Gross Income (AGI) as much as possible before submitting the FAFSA form.  AGI is your income minus your eligible IRS deductions. 

TIP:
You can reduce AGI by taking the maximum allowable deduction for non-education IRAs.  This will reduce your AGI plus set aside an IRA that can be used for education.

You can make withdrawals from your IRAs for qualified higher education expenses without having to pay the 10% additional tax.

More information can be found from the IRS web site: http://www.irs.gov/

See your tax advisor for this type of investment strategy.

Practice Before You Submit

Complete the practice exam before you submit your FAFSA form online.  This allows for a complete review of the form and how best to answer each question.  Use our online guide to complete this exercise.

Next Steps

Next week, we will start a discussion on how the “Expected Financial Contribution” (EFC) is calculated for both parent and student.

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Categories: FAFSA Form Tips, Finance