You’ve all heard it before, “The only two things in life that are certain are death and taxes!” Well, I would like to add a third statement to the mix, “The only three certain things in life are death, taxes, and rising college tuition!”
I imagine that many of you parents who are currently paying, have recently paid, or are researching college prices will readily agree with me. Historically, college tuition rates have increased at roughly 8% annually since 1958. But I am not telling you anything that you don’t already know. College can be expensive!
One of the best ways to mitigate the cost of a rising college tuition is to take advantage f the financial aid funds that are made available by the U.S. Government. Agree with them or not, free money is free money. In fact, it’s partially your money, as these programs are funded by our tax dollars. It is simply a smart idea to take advantage of these funds.
Like everything with the U.S. Government there is red tape, but the Department of Education has made big strides in the past few years to streamline the financial aid application process.
Complete your FAFSA Early
As of January 1, 2012 you are able to complete the 2012 – 2013 Free Application for Federal Financial Aid or FAFSA. This application is a one-stop-shop which will qualify you for every federal aid program, including student loans. You can complete your FAFSA for free here: [button link=”http://fafsa.gov” color=”red” newwindow=”yes”] FAFSA[/button] . **A word of caution, there are many sites which will charge you to complete the FAFSA (fafsa dot com). These are not typically scam sites, but rather FAFSA advisors who will do the same thing for you that you can do yourself. Save the $80 and complete your own FAFSA**
It pays to complete your FAFSA as early as possible. Many schools set priority deadline for FAFSA applications. These priority deadlines dictate whether or not you qualify for institutional scholarships and grants, as well as limited federal funds that each school receives. Many federal programs such as the Federal Pell Grant are available to any student who qualifies. The Department of Education estimates this number each year, and allocates sufficient funds to cover these awards. Many other awards however, such as the Federal Supplemental Educational Opportunity Grant (FSEOG) are limited funds, and are distributed by schools on a first come first served basis. The one metric that financial aid offices use to determine this priority status is the date which your FAFSA was submitted.
Taxes Not Done Yet? Estimate Your FAFSA!
It’s common knowledge that you will need your prior year tax information to complete the FAFSA. A student’s financial need is based largely on their income and the income of their parents. However, the federal tax deadline is April 15th, and schools need a FAFSA by the middle of February……see the problem?
With this in mind, the Department of Education has implemented a tool which allows you to estimate your income for the current tax year based on your prior year tax returns. This way you can complete your FAFSA well before the tax filing deadline, and still have a fairly accurate picture of your financial status for financial aid purposes. Once you have estimated your taxes and submitted your FAFSA, your priority date will be set by the date which your FAFSA was submitted.
It is important to note however, that if you choose this option, your FAFSA application cannot be completed until your tax returns are officially filed. Your FAFSA application gets routed through the IRS system to check for errors, so they will obviously know if you have submitted a return or not. You can’t cheat this system. So once you have submitted your federal tax return, simply login to the FAFSA application and make a correction to a competed FAFSA. These changes will be sent directly to your school, and they will begin the process of completing your financial aid package.
IRS Data Retrieval Tool
One very cool new feature for the 2012 – 2013 FAFSA is the IRS data retrieval tool. This was piloted on last year’s FAFSA, but they have made significant changes to the program and it is much more effective this year. If you have already submitted your federal tax retrns, you are able to port your tax information directly from the IRS, and fill out the financial piece of your FAFSA application.
This saves you the time of going through the tricky line items on your 1040 tax forms to fill in the correct figures. It also saves on human errors in transposing a number, or adding an extra zero. This has historically been the most challenging part of the FAFSA, so this should provide a bit of comfort for many parents out there who are nervous about completing the FAFSA.
You will once again run into the timing issue with needing to submit your FAFSA early. You cannot use the IRS data retrieval for a prior year tax return to estimate your current year, but you can use the IRS datate retrieval tool when you make a correction to your completed FAFSA. This tool will still save you time, regardless of when you use it.
A Necessary Evil
The FAFSA is certainly not the model for effiiciency and you will realize that as soon as you begin the process. But it has made significant strides in the last 5 years, and more positive changes are on the way.
The FAFSA is however, the ONLY way to qualify for federal financial aid. If you or your student have any desire to qualify for federal grants (free money!) or receive federal student loans, then the FAFSA is a necessary evil. However, it can also be a great time to sit down with your student and talk about finances. You can use it as a teachable moment, or even take the opportunity to give your child some autonomy and let them complete it on their own. Scary I know, but it might pay big dividends in the end!