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Top 10 FAQs About College Financial Aid

It’s financial aid season once again. Here are our top 10 FAQs about college financial aid asked by parents and students from among the many questions we’ve handled about the subject over the years:

1. I probably don’t qualify for aid because I make too much money. Should I apply for aid anyway?

Yes. Many families mistakenly think they don’t qualify for financial aid and prevent themselves from receiving it simply by failing to apply. There are also a few sources of aid, such as unsubsidized Stafford and PLUS loans, which are available regardless of need, and the application for Federal Student Aid (FAFSA) is free. And many school-specific grants and scholarships are only available if you complete a FAFSA. While it may be tedious, confusing, and intrusive, there is no downside to applying and no excuse for not applying.

2. Do I need to be admitted before I can apply for financial aid at a particular university?

No. You can apply for financial aid anytime after October 1st. To receive funds, however, you must be admitted and enrolled at the university.

3. Why can’t I submit my financial aid application before October 1st?

The need-analysis process for financial aid uses the family’s income and tax information from the “base year” which is the tax year prior to the last one filed (aka prior-prior) to judge your eligibility for need-based financial aid during the upcoming academic year (the award year).

4. Do I need to reapply for financial aid every year?

Yes, most financial aid offices require that you apply for financial aid every year. If your financial circumstances change, then you may receive more or less aid. You will receive a “Renewal Application” after the first year of filing that contains information from the previous year’s FAFSA. Note that your eligibility for financial aid may change significantly, especially if you have a different number of family members in college. Renewal of your financial aid package also depends on you making satisfactory academic progress toward a degree, such as earning a minimum number of credits and achieving a minimum GPA.

5. How do I apply for a Pell Grant and other types of federal need-based aid?

You must submit a FAFSA application form. To indicate interest in student employment, student loans, and parent loans, you should check the appropriate boxes on the FAFSA. Checking these boxes does not commit you to accept these types of aid, as you will have the opportunity to accept or decline each part of your aid package later, but leaving these boxes unchecked will not increase the number of grants you receive.

6. Are my parents responsible for my educational loans?

No. Parents are, however, responsible for Federal PLUS loans. Parents will only be responsible for your educational loans if you are under 18 and they co-sign your loan. In general, you and only you are responsible for repaying your educational loans. On the other hand, if your parents (or grandparents) want to help pay off your loan, you can have your billing statements sent to their address. Likewise, if your lender or loan company provides an electronic payment service in which the monthly payments are automatically deducted from a bank account, your parents can agree to have the payments deducted from their account, but your parents are under no obligation to repay your loans unless they co-sign. If they forget to pay the bill on time or decide to cancel the electronic payment agreement, you will be held responsible for the payments.

7. Why is the family contribution listed on the Student Aid Report (SAR) different from the family contribution expected by the university?

The federal formula used in by the FAFSA for computing the expected family contribution (EFC) is different from the formulas used by many universities. In particular, the federal formula does not consider retirement account balances or home equity as part of the assets, while many private colleges do take home equity into consideration for their institutional funds.

8. Do I need to begin repaying my loans if I take a leave of absence?

Not immediately. The subsidized Stafford loan has a grace period of 6 months and the Perkins loan has a grace period of 9 months before the student must begin repaying the loan. When you take a leave of absence, you will not need to repay your loan until the grace period is over; if you use up the grace-period before you graduate, you’ll need to begin repaying your loan immediately after you graduate. It is possible to request an extension to the grace period, but this must be done before the grace period is used. If your grace-period runs out in the middle of your leave of absence, you’ll need to start making payments on your student loans.

9. I received an outside scholarship. Should I report it to the financial aid office?

Yes. If you are receiving any financial aid from university or government sources, you must report the scholarship to the financial aid office. Unfortunately, the university will adjust your financial aid package to compensate. Nevertheless, the outside scholarship will have some benefits. At some universities, outside scholarships are used to reduce the student loan level.

10 Are work-study earnings taxable?

Yes, the money earned from Federal Work-Study is generally subject to federal and state income tax, but exempt from FICA taxes (provided you are enrolled full-time and work less than half-time). The student should be careful to report amounts based on the calendar year and not the school year.

FREE GUIDE to COMPLETING the FAFSA

If you’re struggling with completing the FAFSA, you may find this free 82-page reference guide pepared by the Association of Certified College Funding Specialists to be helpful:

The college admissions and financial aid process can be both complex and confusing. If you need the assistance of an experienced financial planner to develop a college funding game plan for your family, please reach out to an Accredited College Funding Specialist at CollegeCashPro at 978-388-0020 or 617-398-7494. Choosing the right college at the right price can be a difficult decision, and the assistance of a qualified advisor can help move you in the right direction and potentially save you thousands.