Paying for college and filing college financial aid forms can seem like you have to be a contortionist to jump through the hoops set up by colleges. With a bit of knowledge and help, you can find the money you’ll need to pay for school. In this 2017 College Financial Aid Guide: How to Get More Aid, courtesy of Forbes, you’ll find out how to use the FAFSA and Profile forms to get more aid. You’ll be better prepared to navigate your way through the forms. And with the help of a qualified college financial planner, you’ll be able to stick your landing, too.
2017 College Financial Aid Guide:
There’s no denying that college is expensive. But with a little financial planning and understanding the rules you may find that you can be in a better position to qualify for more aid or at least get a ‘bigger bang for your buck’ when it comes to finding the right school that will make your Expected Family Contribution (EFC) go farther.
FAFSA versus CSS Profile: How to Use the FAFSA and Profile to Get More Aid
There are two basic financial aid forms that students may use. Each calculates a family’s income and asset resources available to pay for college differently.
By understanding the differences, you can plan ahead on the optimal ways to position parent and student assets.
The FAFSA is the one that most every college uses for its students to determine financial aid. A certain amount of parental income is exempt based on the age of the oldest parent. Certain assets are exempt from the formulas like retirement accounts and home equity. And students have an exemption on a small portion of their own assets.
The Profile form is used by some of the most selective private colleges in the country. It is much more in-depth and asks families to provide more detail to provide a more complete picture to college financial aid officers. This is why home equity is a part of the calculation though many schools cap how much is used in the aid eligibility formula.
Key takeaway: Don’t overestimate your asset values. Whether you’re listing the value of a brokerage account or your home, consider the impact of transaction costs and taxes that you’ll incur when and if you have to liquidate your accounts to pay for college.
For most families, it’s not a good idea to list assets in the name of your child. These are assessed at a higher rate than if they are held in the name of parents (20%+ versus 5.6%). Understanding this ahead of time means you may be able to shift around who owns what.
How Income Gets Counted for Financial Aid
The biggest driver for financial aid eligibility is a family’s reported income. Parents are expected to pay up to 47% of their net available income after certain exemptions. Understanding what makes up this number may help parents to plan better. And with changes implemented this past October, it is even more important to plan ahead.
The Prior-Prior Year
In 2015, new rules were adopted that came into play when financial aid form season began October 2016. Before this, income was based on the ‘Base Year’ which was the tax year in the year prior to the student’s first year of attendance in college. So this would have been based on the income tax return for the parents when the student was a junior in high school.
Now, the formulas will be based on the tax return from the year before that or the ‘prior-prior’ year so as early as the student’s sophomore year in high school. So any planning that can be done to help a family lower their Expected Family Contribution (EFC) had better be in place early to get maximum benefit.
Caution: Beware of Where You Get Your Advice
Thanks But No Thanks: While friends, family and coworkers have good intentions, they are usually the worst source of financial aid advice. Your planning needs to be based on your family’s unique situation only! – Troy Onink, College Financial Planner
Everyone knows someone who has had a family member go to college. Everyone knows some horror story or another on how families have gone into debt to pay for college. But just because someone knows how to read the forms doesn’t mean that filling them out is quite so simple. And even if your friends and family have the very best of intentions, they may be guiding you into a minefield providing advice especially if they don’t know your personal finances.
It’s probably going to be less painful and less expensive in the long-run to get the help of a guide when trying to navigate these waters. To explore your options, you’re welcome to call 978-388-0020 or 617-398-7494.
To access the guide, click here: http://clearviewwealthadvisors.vestorly.com/posts/stanganelli-1-2017-guide-to-college-financial-aid-the-fafsa-and-css-profile?id=stanganelli-1
