As a former Financial Aid Officer at a college I have become intimately familiar with the dangers of waiting until the last-minute to submit a FAFSA. Most people are not aware that as of January 1st, 2013, students are able to submit their 2013-2014 FAFSA for the upcoming 2013 Fall semester. The majority of colleges and universities have strict deadlines that must be met to be considered for financial aid. Missing these deadlines can have disastrous effects on your financial aid award letter.
Almost every institution of higher learning also has internal scholarship programs that can be accessed as additional sources of financial aid. All in all, the old adage “the early bird gets the worm” holds true. A lot of institutions have grant and scholarship programs that are awarded on a first come first serve basis.
File FAFSA BEFORE Filing Your Taxes!
Another bit of useful information for students and parents is that you can actually submit your FAFSA without having filed your taxes. On the FAFSA, when it asks you if you have submitted your 2012 tax returns, simply select the “I will file my taxes” option. Then once you have submitted your 2012 returns, simply log back into the FAFSA with your FAFSA pin and complete your tax information. If you have filed for an extension, this lets you submit your FAFSA while your taxes are still being processed.
Today is May 23, which means that many of the deadlines for the Fall 2013 semester have already been missed. It is not too late however to continue applying for more scholarships and grants to help earn more money for college. Applying for free money for college will help you avoid taking out student loans and avoid the burden of paying back student loans after you graduate. By taking advantage of the financial aid available on your campus you can maximize your changes of that elusive “free ride” to college.
You can check the local public library or your local high school guidance office for excellent scholarship opportunities. I encourage you to apply for as many of them that you qualify for!
- Submit your FAFSA early!! (As early as January 1st)
- Submit your FAFSA even if your taxes have not been filed yet
- Take advantage of ALL scholarships and grant programs by being one of the first students to submit their FAFSA for the upcoming school year.
- Contact your financial aid office if you have any questions, they will be more than happy to help you.
As we are all well aware, it is tax time again…
If you, your spouse, or one of your dependents attended an institute of higher education this past year, they should have received a 1098T tax from from their school. **Many schools make these available online, and do not mail them out, so please check your school’s online portal if you have not received one**
The 1098T is used to qualify for the American Opportunity Credit and the Lifetime Learning Credit: http://www.irs.gov/uac/Tax-Benefits-for-Education:-Information-Center
One important point to note is that the majority of colleges and universities report qualified tuition and related expenses based on when the amounts were “billed” as opposed to when they were actually paid. This may cause a headache for you when filing your taxes because you will likely want to file based on how much and when you actually paid the expenses. It is ok to do this, but you must figure out the exact amount of “qualified” expenses versus non-qualified expenses, and file accordingly.
In the end, it is often easier to simply file according to how the 1098T is reported from your school.
In the end however, the 1098T is only for informational purposes, and you can do with the form what you would like. Yes, it is submitted to the IRS, but many people do not claim their education deductions strictly according to the 1098T.
For a sample form, and an explanation of each of the boxes you will see on your form, please see below!
Instructions for Student
Box 1. Shows the total payments received in 2012 from any source for qualified tuition and related expenses less any reimbursements or refunds made during 2012 that relate to those payments received during 2012. Please note, Box 1 may be intentionally left blank. Many colleges reports tuition billed and not payments received. For information regarding total payments made to your student account, please see the supplemental information accompanying your 1098T.
Box 2. Shows the total amounts billed in 2012 for qualified tuition and related expenses less any reductions in charges made during 2012 that relate to those amounts billed during 2012.
Box 3. Shows whether your institution changed its method of reporting for 2012. It has changed its method of reporting if the method (payments received or amounts billed) used for 2012 is different than the reporting method used for 2011. You should be aware of this change in figuring your education credits. The credits are allowable only for amounts actually paid during the year and not amounts reported as billed, but not paid, during the year.
Box 4. Shows any adjustment made for a prior year for qualified tuition and related expenses that were reported on a prior year Form 1098-T. This amount may reduce any allowable education credit that you claimed for the prior year (may result in an increase in tax liability for the year of the refund). See “recapture” in the index to Pub. 970 to report a reduction in your education credit or tuition and fees deduction.
Box 5. Shows the total of all scholarships or grants administered and processed by the eligible educational institution. The amount of scholarships or grants for the calendar year (including those not reported by the institution) may reduce the amount of the education credit you claim for the year.
Box 6. Shows adjustments to scholarships or grants for a prior year. This amount may affect the amount of any allowable tuition and fees deduction or education credit that you claimed for the prior year. You may have to file an amended income tax return (Form 1040X) for the prior year.
Box 7. Shows whether the amount in box 1 or 2 includes amounts for an academic period beginning January-March 2013. See Pub. 970 for how to report these amounts.
Box 8. Shows whether you are considered to be carrying at least one-half the normal full-time workload for your course of study at the reporting institution. If you are at least a half-time student for at least one academic period that begins during the year, you meet one of the requirements for the American opportunity credit. You do not have to meet the workload requirement to qualify for the lifetime learning credit.
Box 9. Shows whether you are considered to be enrolled in a program leading to a graduate degree, graduate-level certificate, or other recognized graduate-level educational credential.
Box 10. Shows the total amount of reimbursements or refunds of qualified tuition and related expenses made by an insurer. The amount of reimbursements or refunds for the calendar year may reduce the amount of any education credit you can claim for the year (may result in an increase in tax liability for the year of the refund).
Via: Online Universities Blog
This is a fascinating infographic.
The most fascinating piece of the entire graphic is that 77% of students received financial assistance to attend Harvard and that the average tuition for these students was $11,500. That is pretty cheap compare to the vast majority of other schools in the United States, and certainly compared to the majority of Ivy Leaguye Schools.
How does Harvard accomplish this?
Look at the size of their endowment? As one of the oldest and most prestigious universities in our country, they have a rather large endowment, and their alumni strive to keep it that way. Money flows back into money, and the cycle continues.
This is also very encouraging for you as a student or as a parent of a student. Colleges even as expensive and prestigious as Harvard have relatively low costs of attendance. These colleges are attainable.
Don’t kill your dreams (if that is indeed one) of attending Harvard or any other Ivy League School just yet. They might be much more within your reach, financially, than you ever thought possible.
Would you want to attend Harvard for $11,500 per year?
Anything else in this infographic stick out to you?
USA TODAY recently ran an article about the shrinking pool of financial aid, and how there is more stiff competition than ever for the financial aid that does exist.
Here is the down and dirty according to USA TODAY:
Several states have reduced scholarships or toughened eligibility criteria for financial aid. Eligibility for the maximum Pell Grant, the largest source of federal financial aid, has also been tightened. Meanwhile, the number of families applying for financial aid has soared. More than 21 million families filled out the Free Application for Federal Student Aid (FAFSA) for the 2010-11 academic year, last fall, up 49% from two years earlier.
This sounds like depressing news, but I would give a much rosier view of the situation. Yes, the Federal Pell Grant applicant pool has grown tremendously. However, the Pell Grant is a guaranteed award. Meaning if you qualify, you earn it. Our government has set aside enough funds to cover every student that applies. This may not say good things about our government’s fiscal policy, but it should give you some comfort in applying for the Pell Grant. Also, Pell Grant funding has been secured through 2015 according to new legislation.
The article also notes that states have tightened the reins on qualifying for state supported scholarships. This is a sad trend but not one without hope. The positive trend that I have seen in recent years is that colleges have stopped relying as heavily on state supported scholarships, and they have begun relying more on school supported scholarships. Athletic departments are pumping money back into schools to be earmarked for Academic scholarships. Private donors are increasing their contributions which are earmarked for scholarships. Cost cutting measures have freed up University funds to be put back into the scholarship program. Colleges and universities have begun to realize that students are their greatest asset. Just like great employees make a company profitable, great students make a school excel. Scholarship money is one of the main lures to attract top tier students.
The USA TODAY article does go on to give three tips to deal with what they believe is a worsening financial aid situation:
1. Pay attention to deadlines.
2. Be on the lookout for private scholarships.
3. Use net price calculators as a screening tool, but exercise caution.
I actually strongly agree with all 3 of these points. We have talked numerous times here about how important financial aid deadlines are. Missing a crucial financial aid deadline could mean the difference in thousands of dollars in aid.
Private scholarships, and especially local scholarships, are in my opinion the absolute best source of financial aid. You compete against a limited applicant pool, and you can gain the support of your local community. It’s a win – win!
Finally, the article mentions the debacle that is a net price calculator. The intent was good, the end result was a confusing mess. The net price calculator was a mandate from the Department of Education for all schools to be able to give prospective students an estimate of what they could expect to pay. The net price calculator gives all students an estimate of their tuition and fees, and then subtracts an estimate of their financial aid. The problem is that these estimates are almost always way off. The calculator often does not include private scholarships, and never includes student loans. These differences are not explained to students, which gives them a very skewed view of the financial aid that they can actually expect to receive from one school versus another.
With that said, I firmly agree with this author’s suggestion to take the net price calculator with a grain of salt. It can be a good tool, but should not be your deciding factor.
Have you noticed any drop in financial aid in recent years?
This post was originally published back in 2009 on the first variation of the Money for College Project. I would selfishly like to think that my writing has improved from these humble beginnings, but it’s probably not true. Regardless of the writing, the information is still gold. The Pell grant is the premiere need based grant funded by our tax dollars and administered by the Department of Education. Complete your FAFSA to qualify for this award and all other federal grants and Stafford student loans.
Every year Federal Student Aid (FSA) provides more than $83 billion in financial aid across their various programs. This money assists about 14 million students attending college. With those staggering numbers I can promise you that if you complete the proper steps I outline here on this blog, you can get a piece of that money!
Over the next few days I would like to explore the different types of Federal Student Aid. With 10 different programs that offer assistance to students, it is easy to get lost in a cloud of numbers and unfamiliar terms. Hopefully, after we have gone through this journey of exploring every program in detail, you will have a better understanding of how you fit into the big picture, and most importantly, where you can go for your money!
Before we get into the individual programs, it is important to note HOW one would go about applying for this aid. GOOD NEWS! It’s simple: The Free Application for Federal Student Aid (FAFSA). With one application you will be evaluated for all 10 FSA programs. Simply go to www.fafsa.gov and follow the steps to submit your application (Intimidated by the FAFSA?? More to come on that later so stay tuned!).
Now that you know how to apply for all these programs, let’s look a little closer at each one.
First: Federal Pell Grant
This is the most important Federal grant as it is the largest grant. Since it is a grant, it does not have to be repaid. The Pell Grant is available exclusively to undergraduate students and your eligibility is determined by your financial need. Your financial need is used to determine how much of the Pell grant you will receive, if any.
For the 2009-2010 award year (which runs July 1st 2009- June 30th 2010), the maximum amount you can receive in Pell is $5350 (**For 20120-2013 the maximum Pell award is stuck at $5500). Depending on which college you attend this could be enough to pay your entire tuition (eg. the school where I (formerly) worked is only $1746 for a full time student, per semester!) Or if it will not pay your entire tuition, the Pell grant will almost certainly make a significant dent in your college tuition bill.
Also, for part-time students, the Pell grant can be applied to your tuition through a scaling award system. Here is an example: If you receive the maximum Pell award of $5350, that breaks down to $2675 in Fall and $2675 in Spring (if you come full time). If you come half time, the Pell amount would be cut in half or $1338 each semester. Now keep in mind, your tuition should also be less, so Pell should cover roughly the same percentage of your tuition bill whether you take full or part-time classes.
Coming up next: Federal Supplemental Educational Opportunity grant (FSEOG)
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: FAFSA . **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 Stafford 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!