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Filling out your Free Application for Federal Student Aid, or FAFSA, is one thing you can't afford to overlook. It's the application that all college students must complete in order to be considered for government grants, loans, and work-study programs. Here are some money saving FAFSA filing tips you should take advantage of!
College Funding Hero > FAFSA
Senior year of high school is a hectic period. You must complete college applications and visit colleges, in addition to homework and other activities. Filling out your Free Application for Federal Student Aid, or FAFSA, is one thing you can't afford to overlook. It's the application that all college students must complete in order to be considered for government grants, loans, and work-study programs. In other words, anyone planning to attend college or graduate school should submit the FAFSA so they don’t miss out on financial aid.
Here are some money-saving tips that could help minimize your college costs and maximize the amount of college financial aid your child receives:
There are imposters out there that try to persuade you in with promises of scholarships or financial aid guarantees, so make sure you fill out the FAFSA on the official government site, which is free. If a website requests payment, you can be certain it's a scam.
Some families are still missing out on financial help because they don't even fill out the FAFSA. They may have believed one of the FAFSA misconceptions, that they earn too much money, or that it is too difficult. Even if you don't qualify for financial aid, you may still need to fill out the FAFSA if you want to borrow money from the federal government.
PS: You might be surprised to learn that the equity in your property is not taken into account when applying for need-based aid so the size of your house will not affect the amount of aid you receive.
Grants are awarded on a first-come, first-served basis in more than a dozen states. Colleges may also have early deadlines, and if you apply late, some federal student funding may run out. Did you know that students who file the FAFSA earlier may be eligible for greater financial aid? On average, students who complete the FAFSA in October receive more than twice as much grant aid as students who file later. So, if you want to maximize your aid eligibility, file the FAFSA in October.
You may be tempted to transfer some assets to your child to make your financial situation appear weaker but this tactic could backfire. The value of a child's assets is valued at 20%, whereas the value of the parents' assets is valued at only 5.64 percent. It is best to save money in the parent’s name, not the student’s name. Luckily, money in a 529 college savings plan is treated as though it were a parent asset, regardless of whether it is owned by the student (a custodial 529 plan) or the parent.
For example, the assets are recognized as a parental asset on the FAFSA and counted at a maximum of 5.64 percent of the account's value if the funds are converted to a custodial 529 plan account. Saving $10,000 in a custodial 529 plan account reduces need-based financial aid eligibility by at most $564 in available money to pay for college.
Because income is significantly weighted in the financial aid formula, it's a good idea to keep your income low during the base year. Avoid realizing capital gains during the base year, for example. If you have to sell stocks, bonds, mutual funds, or other investments, strive to balance your gains and losses. If capital losses exceed capital gains by up to $3,000, you can reduce your adjusted gross income (AGI). Even if the withdrawals constitute a tax-free return of contributions to a Roth IRA, you should avoid taking out retirement plan distributions during the base year since they would be counted as income on the FAFSA.
If you have more money in your checking or savings account, you might use it to pay down your mortgage or pay off some of your debts. Not only does paying off high-interest debt with low-interest savings make good financial planning sense, but it will also help you qualify for more financial aid. The FAFSA does not query about debt, but it does inquire about liquid assets. If those balances are lower, your child may be eligible for additional assistance.
The FAFSA opens on Oct. 1 every year. The federal filing deadline is June 30 the following year. Schools and states set their own FAFSA deadlines, which tend to fall much earlier than the federal deadline. To find a school’s deadline, you can look on the financial aid section of its website or reach out to its financial aid office directly.
Try to submit your FAFSA as soon as possible, though, since some aid is distributed on a first-come, first-served basis. Note: Filing a FAFSA isn’t just a one-time move. Students must file a FAFSA renewal each school year to re-establish their need and eligibility for student aid.
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Great question! I’m a CERTIFIED FINANCIAL PLANNER™️ professional. I’m an Enrolled Agent with the IRS, and I’ve been around colleges my whole life. I run a wealth management firm, Vincere Wealth Management and tax firm, Vincere Tax. We’ve helped 100’s of families through the college funding process. On a personal note, I am the son of a college professor, so I guess you could say I was born to help people with college finances. I KNOW these tips will be helpful to you.
If you have any questions, please reach out to me! - Josh
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