February 26, 2007

FAFSA Questions Answered!

Posted in FAFSA, Grants, Legislation Affecting Students, Saving for College, Scholarships, The Financial Aid Process tagged , , , , , , , , at 11:31 AM by College Admissions

The New York Daily News had a great article on paying  for college, written by George Chin, CUNY’s director of financial aid, with a wonderful Q & A on Financial Aid and the FAFSA Application  that I’m including below:

What information is used to calculate the estimate?

The adjusted gross income (as listed on your tax returns) of you and your parents. Other key factors are assets, family size, the age of the parents and number of kids in college. A student with family income of $38,000 and few assets obviously has a better chance of getting aid than one from a family making $180,000 with a portfolio of investments and a summer home.

What’s considered an asset?

Parental assets include equity in a second home, stocks, bonds, college savings plans, businesses and farms (there aren’t too many of these in our area!). Students’ personal savings, businesses, stocks and bonds are also considered. The main residence and retirement plans such as 401(k)s and individual retirement accounts are not included.

Are we expected to use all of our assets to pay for college?

No. The formula acknowledges other important expenses, such as saving for retirement. An “asset protection allowance” also is applied to offset a family’s net assets.

My parents are in their 60s. Does that affect the calculation?

Absolutely. The asset protection allowance, recomputed annually, grows as parents grow older.

Does a student get a break if more than one child is in college at a time?

There’s an adjustment lowering the estimated contribution. With two kids in college, the estimate for one is roughly halved; for three, it’s cut into thirds, etc.

How is family size a factor?

Income is offset based on household size. A family of four with one child in college has $23,560 offset against income. A family of six with a kid in college gets $32,510 offset.

Is the estimated contribution what we’re expected to pay the college in cash?

No. Part of it covers costs normally incurred for kids in school, such as clothes and food. You cover the rest from savings and loans.

Will all colleges rely on the estimated family contribution to determine whether I get financial aid?

Yes and no. All colleges use the amount for federal aid. Info from the College Board is another measure used by many, more expensive private colleges when they award institutional aid. The College Board system, called Profile, collects more financial data than the Free Application for Federal Student Aid for a more complete analysis of a family’s ability to pay. Under FAFSA, for example, 7% of gross income is offset as an allowance against local taxes. Profile applies different offsets to different income levels. For all colleges, fill out FAFSA first. Colleges will tell applicants if they require a Profile form, as well.

How high can my estimated family contribution go?

To $99,999 (no need-based aid there). If you attend a modestly priced private school or CUNY and have annual school costs of $11,000 and an estimated contribution of $11,000, you won’t qualify for aid. Your estimated contribution is the same whether you apply to CUNY, Harvard, NYU or Stony Brook University. It’s based on your finances, not your school.

For more advice, visit:



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  31. Judy said,

    You can fill out the Fafsa for fall starting January 1st of the year college is to be attended. You SHOULD DO IT THEN! You can estimate your income and after your taxes are done you can link with your filed tax papers and your estimates will be changed to actuals. I’m a dunce about computers and this was extremely simple.

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  33. Heidi said,

    I went to college after having a child and am currently paying my own student loans. My child is now applying to colleges. Will we get any additional aid since I am paying my own loans or will this hurt us and we’ll have a harder time getting loans for him?

  34. Laura said,

    If the student’s parents are divorced, can both parents be listed as dependents? I live with my father. He makes a great deal more than my mother does. Can this change my need-based aid?

  35. John Hayes said,

    I am now filling out the FAFSA for my daughter who will be attending graduate school at the age of 22 in the Fall of 2011. Since she has not lived in our home while attending college and has been working in the summer out of state the past 2 years, is it best for her to apply and fill out the FAFSA as an adult on her own rather than her parents filling out the FAFSA with our income as the determining factor. Since she will have little or no income while attending college and we do not intend to assist much with her masters degree costs, would it be more sensable for her to be on her own for the FAFSA following her graduation. Or is this not an option?

  36. Michael said,

    If one has 3 children in college, and each are 18 or older, and one of them earns money and purchases stocks in their own name, does that asset impact just that child’s financial aid or does it impact all three children’s financial aid? — and if so, then to what extent?

  37. Wang said,

    I am applying finanical aid through FAFSA for my master degree starts Spring 2011. I don’t know how to deal the question of how much I have on my bank account. My husband and I only have under $20K income for 2009, but we do have almost $20k saved on our bank accounts. We don’t have any childred yet. Based on my bank balance, do I still qualify for the federal student loan?

    Please advise.
    Your help is great appreciated.


  38. Wang said,

    I am applying finanical aid through FAFSA. I don’t know what to deal the question of how much I have on my bank account. My husband and I only have under $20K income for 2009, but we do have almost $20k on out bank accounts. Based on my bank balance, do I still qualify for the federal student loan?

    Please advise.
    Your help is great appreciated.


  39. momo4 said,

    We are sending our first daughter to college and own 2 business’. One is a C-corp (less than 100 employees) and we own an LLC (less than 100 employess). The LLC is a building that we rent out to landscapers, etc. Do I have to include the assets of either of these business’ on our FAFSA?

    Thanks for ANY help you can give me!!!!

  40. In Alabama, child support is figured using Guidelines set out in legislation. These guidelines can be deviated from for good cause shown and if approved by a Judge, but for the most part, they stick to the formula; it’s pretty cut and dry. This is done not only in the spirit of fairness and equity to keep everyone’s support balanced, but also because of the sheer volume of Domestic cases coming through the Court system. If a Judge had to figure out every situation differently, nothing would ever get done, so they make a set formula to ensure speedy calculation. This is done in numerous other jurisdictions as well. If one is curious about child support in Alabama, there are some up to date Alabama Child Support Calculator (s) out there that will give a pretty close approximation of what your support Order will look like.

  41. Tom R said,

    I meant to say I am 56 not 567.

  42. Tom R said,

    Hi I am a business owner with two to three employees, last year we lost money although the gross was over 100K I paid no taxes in 2009 as I lost $. If I marry my partner who’s son is a fafsa reciepient , how is my business’s worth determined, as my loss will probably continue for the next few years, I am trying to understand the effect marriage will have on his eligibility,I am 567 do not own a home, his Mom is 56 and is making maybe 12,000 per year. Will our matrraiage result in loss of his eligibility?
    Thank you.

  43. erinr88 said,

    Is there a deadline to fill out the FAFSA? Does it need to be done before tax day?

  44. Dave said,


    My mom just passed away in February and left my sister and me her house. We were planning on selling it before I head off to medical school, but I’m concerned how this will affect my loans. I will be coming into approximately $200,000 – I’d like to use a good chunk of it to pay for medical school, but it would be nice if there was some left over to help tide me over in my residency years or to start building a savings. Would I have to use every cent of it for medical school? Or is there a better way for me to handle the money so my loans aren’t affected?



  45. Kerry said,

    I’m filling out my FAFSA and have a few questions. I am able to file as an independent student (24 yo), omitting my parent’s information or including it if I choose. My father unexpectedly passed away two weeks ago… I’m unsure of whether it is more beneficial for me to still include my widowed mother’s information or not. Things are very difficult especially with my sister and I both in college. I don’t live at home and haven’t for 3 years, but my sister does. I don’t receive any help what so ever from my mother but some have said it’s better to include her information anyways. I appreciate any information you have for me.

    Thank you,


  46. Mary said,

    We are the parents of 4 children and are filling out our first FAFSA form [2010-2011]. We used last year’s tax return because we do not have our current w-2s, etc. to fill out current information, but we wanted to get it in. After reading some of your posts — we should have done a bit more research before filing….
    Question: We have UTMA accounts for all four of our children — money was given to them quite a few years ago by grandparents. The four accounts total appx. $225,000 as of this date. First of all, do we show these funds under question #42 for student, or #89 for parent, and do we have to include the other children’s funds in this number? Thank you for the information.

  47. Lori said,

    I have got a tricky situation. I am divorced with 2 sons. We have a written court order stating my ex claims one child and I claim the other. My older son who I claim on taxes has spent more time at his dads over the past 2 1/2 years. His father did his FAFSA last year . This year my son has spent just about equal time with both of us. I pay his dad support for him but when I read through the FAFSA requirements I cannot determine who supports him more. My ex and I both have homes, buy food, etc and I pay support we both same the same expenses that support him,. I lost my job last year and only made 35,000. I am also getting food stamps and fuel assistance. Since he is my dependent until 23 and I cannot afford any loans its seems to make more sense that the FAFSA is done by me this year.

  48. Don said,


    I seem to get conflicting answers on this Question: Are 529 Savings Plan in the Students name (converted from a UTMA) to be included in FAFSA at all? if so, does it count as the student’s or parent’s assets?

    Second Q, I have 3 children and they each have two 529’s. One in their name (old UTMA) and one in my name where they are beneficiary. Only one child is in college so far. When completeing FAFSA for her do I really have to count all three of the 529’s I “own” as my assets? even though two are for the other kids. If so, that would seem unfair as those 529’s will get counted over and over again but are really saved for the others, not available for my oldest.

  49. gary said,

    Question re >50% care for dependent (child) of student
    What if the mother has custody and claims child on taxes but father actually provides more than 50% of child’s support (via child support payments, insurance, clothes, food, and far greater than 50% time spent with father)?
    Can student check YES for providing more than 50% support for child – and hence not require parents income to be included.
    You may ask why father does not claim child as dependent on taxes – it was original agreement with mother and father when they were together and split tax benefit. Now they have split up and mother unwilling to relinquish tax benefit.

  50. Jeff, you should really check out the free FAFSA eBook at FafsaOnline.com. It’s a question-by-question guide to help you through all those tricky questions.

    Here’s what it say for your particular question:
    • If a parent is widowed or single, fill in the questions appropriately.
    • A step-parent (after marriage) is considered a parent from a financial aid perspective.
    • If the parents are divorced or separated, the parent is considered to be the one which the student lived with more in the past 12 months.
    • If the student did not live with either parent in a divorced/separated situation, the parent is the one who contributed more financial assistance in the past 12 months.
    • If the student did not receive appreciably more support from one parent or another, the parent is the one who claims the student as a dependent on the IRS tax return.
    • A foster parent, legal guardian, or a grandparent or other relative is not treated as a parent for purposes of filing a FAFSA unless that person has legally adopted the applicant. An adoptive parent is treated in the same manner as a biological parent on the FAFSA.

  51. Jeff said,

    My son is going to college fall of 2009. I’m divorced and make considerably more money then my ex. Should I use her income when applying to FAFSA? parenting time is about equal.

  52. Chuck,

    I’m not sure where that “3%” figure comes in – perhaps 3% of salary?

    No person has the exact same circumstances, and it’s not just your income that counts in calculating your expected contribution – it’s also other assets and money in the bank. That’s why the FAFSA form is so long and convoluted.

    But I think that I can safely say that if you have $200,000 saved up, then you’re going to be expected to pay that $200,000.

    • brenda said,

      I am a single mom and my son is starting college August 19th 2011. My dad passed away last May and I just received some in heritance which I put in a money market account. However I just lost my job and receive no child support. I do receive maintenance money but I don’t know how that will effect my EFC on the FAFSA or my son’s eligibility for financial aid. What can I expect to happen? Should I make my ex file the FAFSA for him instead of me?


  53. Chuck said,

    I was told by a financial aid counselor at an ivy league college today, that cash savings are “assessed at 3%”, which means that if you have $200,000 saved up (enough for four full years at said college), your expected contribution from that asset is only $6,000 per year, so you are eligible for need-based financial aid.

    However, if you are a working stiff with an above-average income, say $90,000, you are expected to borrow $200,000 to pay for that same ivy league education, no matter if you live in Alabama or in Washington DC.

    My question is: Who the heck made up these rules? Sounds like a bunch of rich people who don’t have to work for a living called the shots.. of was I misinformed?

  54. Ron, according to the article from Kiplingers that I quoted in this post last year:
    https://parentstudentloans.wordpress.com/2008/07/01/divorce-and-student-loans/, a step parent’s income is considered.

    “The federal aid formula considers only the finances of the custodial parent (the parent you lived with the most in the past 12 months). If the custodial parent is remarried, the stepparent’s income and assets are considered, too.”

  55. Ron said,

    My wifes daughter wants to attend college, we’ve been married five years and my step-daughters father is in prison. Do we count him in any way for financial consideration? He has no contribution whatsoever supporting his kids, am I expected as step dad to submit my income info for grant or allowance qualification?

  56. Denise,

    You answer that on question #76, in the purple, student section:
    How many people in your parents’ household will be college students between July 1, 2009 and June 30, 2010?

    Good luck to you and your family!

  57. denise said,

    Hi Monique,

    My husband and I are filling out the fafsa for the first time. We have two kids that are attending college this summer. We understand that if we have two kids, the second could be helped out substantially while we are expected to pay for the first. We are having trouble locating how to do this on the form. How do we indicate on fafsa that we have two children? One of our children (the younger one) already has a pin. Do we use his pin for both children? Please guide us in how to fill out the forms correctly for two children in school at the same time.


  58. Dan Bechtol said,

    Thank you very much for the help. We’ll speak with an accountant.


  59. Hi Dan,

    I’m not an expert in this area, so I asked my coworker, Chris Penn, who has a lot more experience then I. I also asked if it would be better for your mother to gift the money to your family or cut a check directly to the school. Here are Chris’ comments, and I’ll add my own below:

    “The money is a gift and will be reported as untaxed income on the FAFSA. If Grandma writes the check to the college on behalf of the student, that’s still considered a gift and would affect financial aid, even if it’s not counted as a parental asset. They need to talk to an accountant to run the numbers; in cases where students receive a significant amount of need based aid, it’s often better for Grandma to park the money in a CD, let it mature, and gift it to the student at graduation to pay off any loans they’ve taken out. If the student receives very little aid, then the cost of borrowing is going to be greater than the repayment and it’s better for Grandma to cut a check to the school.”

    I also definitely recommend talking to an accountant or financial planner and have them run the numbers for you. You should also ask how much can be gifted within a family without paying taxes – there used to be a $10,000 limit per year per family member, but that was years ago and I don’t know if that’s still true.

  60. Dan Bechtol said,


    My mother wants to give my wife and I $25,000 dollars from the sale of her home. How will this gift effect our household income as reported on the FAFSA forms ( we will have two sons attending college by September)? Is the money considered income? If we purchase a CD will we have to claim the gift as an asset next year? Thank you for the help.


  61. Debbie said,

    Hi Monique,

    Thanks for clearing me up on my blogging skills – I am not very familiar with it.

    I spoke with a FAFSA representative who stated that what is on the form is correct. The question was “Where you born before January 1, 1986”. The rep indicated that if she indeed was born before them, she would be classified as independent.

    I sent an email to Debby Sheets at the U.S. Department of Education Friday afternoon and I just received her response. She did contact FAFSA and FAFSA is not looking at what month they were born in, they are looking at the year. So, being under 24 does not necessarily mean that you would be classed as a dependent, it’s whatever year you were born in. So, after many, many hours of researching this and every source I spoke with, I was given the same information you gave me. FAFSA I guess is doing their “own thing”.

    I suppose I will now go in and remove all of the “parent” information I submitted. This has been a crazy process. We learn something new everyday, don’t we? I appreciate you and all your help. Have a great day.


  62. Debbie said,

    Hi Monique –

    I sent an comment to you last week but I have no idea what happened to it. FAFSA is telling me that my daughter is considered an independent since she was born before January 1, 1986. My understanding is unless she is 24 years old, she is considered a dependent. She just turned 23 in December and I am extremely confused because all of the information I have researched states she is not an independent unless she is 24, married, has children, etc. Can you clear this up for me?


    • Debbie – your original comment was on another page of the blog, the “How to use this blog” page. Below, I am copying and pasting myy answer to you:
      Debbie – whom exactly did you talk to? The US Department of Education? the FAFSA is a form, so I’m not sure who you spoke to.

      Now, perhaps they’re counting the “age 24″ to be someone is age 24 by Jan 1st, 2010. IF that’s the case, that’s the first I’ve heard of it.

      Here is the department of education’s FAFSA contact form – I would email asking for clarification. Hang on to their response, so if you ever have questions in the future, you have this “written” proof from the department. Paper trails are a good thing, even if they’re electronic. 🙂

  63. Steph said,

    Hi. On the FAFSA it asks if anyone in your family gets SSI. My husband & I are considering going to college, but do we have to include our kids’ SSI? They are disabled. It says to include all household members, but then at the top, it says to only answer if it applies to you or your spouse. If we have to claim it, we will get nothing even though our income from wages is only $27,000. It’s not like we get the benefit of their SSI money.

    • Hi Steph,
      This is one question I’ve never had before! I believe you only need to report for you or your spouse – a child’s SSI is not considered part of the adult’s income.

      Also, you should download the free FAFSA eBook – it’s got great tips to help maximize your financial aid. You can reach it at: http://www.fafsaonline.com/fafsa-guide-ebook.php

  64. Amber said,

    Thanks, that helped me out.

  65. Becky – yes, buy the car now. It’s better to have less money in the bank, generally speaking, as it’ll count against you. Graduate EFC is really not much different than undergrad family’s EFC.

    Money in the bank is considered available to pay for school, so if you’re planning on spending it, spend it before you file the FAFSA or it will get counted.

  66. Amber, I’m no tax expert, but perhaps this will help:

  67. Becky said,

    I’m starting grad school next year and am now working on FAFSA. I’m filing as independent (25 yrs old), and I’m concerned about my assets being counted against me. I’ve got about $12,000 in the bank from working and aggressively saving the past couple years. How would that affect my expected contribution? The thing is, I don’t have a car, and I’ll need to have one for the place & program I’ll be in next year. Would I be better off to go ahead and buy a car before I complete FAFSA, so the assets are no longer in the bank?? I’m having a hard time finding information about expected contributions for grad students. Any help would be very appreciated.

  68. Amber said,

    Hello, I am graduating in May 2009 and plan to begin graduate work this summer on my master’s degree, and am in the process of applying. I filled out my fafsa as an independent, and just filed my taxes as well as an independent for the first time, because I thought this was what you were supposed to do when beginning graduate work. I am 21 and my mom talked to people who do her taxes, and they said that I should not have filed as an independent on my taxes and that I should re-file as a dependent so that my mom can claim me. I am not sure what the right course of action would be, because I have no idea how to re-file my taxes. Would you have any information or advice for me? I appreciate any help you can give. Thank you.

  69. Erinmeier said,

    Monique…you are wonderful. Perfect video for me. I worried all weekend about this. You have given me a starting point. Bless you.

  70. Erin – you need to watch this short video – it explains exactly what to do.

    It’s my colleague, Christopher Penn, appearing on CNBC to discuss this very type of situation.

  71. Erinmeier said,

    BTW….thanks for any help you may be able to offer.

  72. Erinmeier said,

    Hi Monique:

    Help…just finished FASFA online. We got a 22000 EFC.

    Last year, we made 100,306. We are a family of 6. Husband and Wife and four children. Youngest was diagnosed with severe autism late last year so wife took voluntary layoff. Our income has dropped to approximatley (expected) 35,000 for year 2009. I did indicate that parent was a displaced worker on the FAFSA form. What should I do to prove to universities that we are unable to pay the EFC?

    Daughter got a 2000 on her SAT’s and maintains a 3.8 in her AP courses. She worked hard, and we aren’t going to be able to do a thing for her. HELP. SOS.

  73. Debi – I missed one qualification above for independent students – people getting advanced degrees (Masters,PhD, etc) are independent students.

  74. Debi, you are very welcome. I’m glad I could help.

    There are a couple different reasons why she didn’t get the loan. Is she attending less than half time? That’s usually less then 12 credits, but varies per school. Are her grades poor? That can affect financial aid. Is her school accredited and does it participate in the federal loan program? Not all schools do, and if a school loses accreditation it’s not allowed to.

    The most common reason that I’ve encountered is that financial aid is first-come, first-served. So file that FAFSA now! This year EVERYONE is looking for aid, so get your claim in quickly.

    Now, if she’s full time, her grades are good, the school is accredited and gives out federal loans, and you filed early last year, I suggest you and your daughter ask the school. You may learn something important!

  75. Debi said,

    Thanks Monique – you’ve cleared up a huge concern for me. The only other thing I was hoping for a comment on was the reference to her school not granting her the loan that she qualified for. Why would they do this and can they do this? The school has not given us any explanation. Thanks!!

  76. Hi Debi,
    Your daughter is half right, but she got the message a little mixed up. A person classed as an independent student does indeed get more financial aid.

    HOWEVER – your daughter likely doesn’t qualify. The rules on the FAFSA are not the same as on your taxes, nor does her being independent/dependent on the taxes make a difference on financial aid.

    To be classed as independent on the FAFSA, your daughter must be 24, married, legally emancipated by a court of law, active duty in the military, be a parent herself, a ward of the court, or a foster child.

    Here’s the official Pell Grant description from the Department of Education:http://www.ed.gov/programs/fpg/index.html

  77. Debi said,

    I need help as to a comment my daughter came home with. She is in her 2nd semester of dental hygiene school at a local college. She does not work as the school study load is huge. I support her (she is 23) but she claims that if she files her income tax return for 2008 and claims herself, she will receive more money for a pell grant. Is this true? Also, I know this is lengthy but I’m dying for some answers. She qualifed for a loan last year (through FAFSA) but the school denied her a loan. I heard today that the school cannot do that. The summer program is coming up and she will have absolute $0 money for school. I am a single mom, recently unemployed and I can’t help her at all. Any information will be greatly appreciated.

  78. Ted,
    You know, I have no idea! This is a niche area that I’ve never even looked into, and by the tiem I track down an answer, it won’t be helpful to you.

    I suspect not, as the money would be tied to your step-son’s SSN, but if I were in your shoes I would consult a tax professional, as they often prepare FAFSAs along with taxes.

  79. Ted said,

    My 13 year old step-son receives money from social security for his deceased father, do I have to claim this as income?

  80. Hi Wes,

    Trust funds held under someone else’s SSN are completely invisible to the FAFSA.

    Now, if they are listed under your son’s SSN, I’m not sure where it would go – I would suggest talking to a tax professional as many such as H&R Block also help prepare the FAFSA while doing your taxes. They will likely be able to answer this question for you.

  81. Wes Stinson said,

    We are first time FAFSA parents. When I finished going over the application I couldn’t figure out where to account for funds held in trust for my son. His Grandmother is the trustee for these, they were established for his benefit by his Great Grandparents (for educucation purposes). They are in mutual funds which file under an EIN (except they from time to time have listed my son’s SSN???). We and He have no control over them – in fact we rarely get any information about them from the trustee.
    These were listed on the CSS PROFILE but when do we account for them on the FAFSA?

  82. Hi Steve,

    I wasn’t sure about the answer to this, so I consulted with my co-worker Chris Penn, host of the Financial Aid Podcast. Here’s his response:

    “It won’t count – the FAFSA says:

    Investment value means the current balance or market value of these investments as of today. Investment debt means only those debts that are related to the investments.

    This would exclude student loans, consumer debt, credit card debt, etc.”

  83. Steve said,

    Im filling out my FAFSA to attend graduate school. To calculate my current balance, the FAFSA says to calculate total assets minus total debt. I have a previous student loan in the names of myself and my parents. Can that be subtracted to calculate my total current balance?


  84. Hi Mike,
    I’m not sure why it’s set up the way it is, but I can tell you that the FAFSA is heavily biased in favor of dependent students. Students whose parents do not help them pay have even greater troubles than your family.

    Since you validly have 2 students in college in your immediate family, and your daughter’s school will be notified by her FAFSA, I suggest calling your wife’s school ASAP and ask them how you should document this for them.

    You’ll be doing 3 things:
    1) notify them of the 2nd member of your family in college
    2) flatter them that you want to know how best to work with them, and
    3) hopefully find an easy way to get all this straightened out!

  85. Mike said,


    In filling out the FAFSA, I expected my “number in college” to be 2, one for my daughter and one for my wife. However, the question excludes parents in college! I don’t understand why they would be excluded. I’m paying $26,000/year for her full-time, college degree, yet my EFC doesn’t take this into account? I understand I can put (2) on her FAFSA, but why exclude parents on my daughters? (Especially since most of the EFC comes from parent contribution?)

  86. Hi Jim,

    Consolidation programs are getting harder to find because of the current economic situation (they used to be offered by nearly all student loan companies).

    I believe the federal Department of Education is still offering consolidations. You can visit their website at http://loanconsolidation.ed.gov/

    Their rates are unlikely to be reset any time soon, if they are federal loans. It literally takes an act of Congress to change the rates, and they are normally updated annually, on Jul 1. I’m not certain if they will this year, as last year they put in place scheduled rate changes for new loans issues over the next few years, however these changes do not affect loans already disbursed, I believe.

  87. Jim said,

    Our two both graduated this past spring. We have a home equity debt that we’re re-paying, and each kid has student loan(s) at around 7%, upon which they’re just beginning to pay.

    In light of the recent interest rate cuts, is there any kind of consolidation or rate re-setting option that is available to them? If it matters, our son’s loans were subsidized; our daughter’s were not.



  88. You’re very welcome, Ken. I look at financial aid as “if the government can make things more difficult, it will”. 🙂

    I mean, take the FAFSA form – this year’s form is “simplified”. Meaning, it has 10 additional questions, most of which are multi-part!

  89. Ken Derzawiec said,

    Thank you so much for your prompt reply. and for the links. We have an Equity line of credit for emergencies that we never use- we were wondering how FAFSA would treat this.
    This is a great spot for us first timers.
    College was a lot simpler back in the “old days”!

  90. Hi Ken,

    I think you need to visit FAFSAOnline.com and do some research – there’s a tone of great, free information there. Pay close attention to the second item on this page: http://www.fafsaonline.com/financial-aid-secrets.php – “Get rid of all your cash” and visit this page: http://www.fafsaonline.com/fafsa-form/ To learn some important tips and to download a free line-by-line guide that explains it all in plain English.

    I’ll give you some quick facts to help you make your decision, but mind you that I am not a qualified financial planner and so cannot offer you advice.

    You can use equity if you want, but you don’t want that money hanging around in a bank account because it’s considered cash on hand on the FAFSA. Also, unless your job is very secure, this recession is a bad time to gamble with taking loans against your house. If you should lose your job, you’ll have a real problem on your hands. The Parent PLUS loan may be a good option for you with property values declining, as you don’t want to owe more on your house than what your house is worth! Plus, if you do hit hard times, the PLUS loan can be put in deferment or forbearance for a time to allow you to get back on your feet, while the home equity loan won’t.

    Please read the resources I’ve linked to above as they’ll give you more background information.

    Good luck!

  91. Ken Derzawiec said,

    We are first time FAFSA applicants.We are told that equity in our primary residence is not counted as an asset and in fact should consider an Equity loan to pay for certain expenses. How is an Equity Line of Credit treated? Is the total amount of the credit line considered “cash available”?
    Will we be penalized for taking a credit line rather than a fixed amount loan?
    Thank you for any help.

  92. Beverly said,

    Thank you so very much for getting back to me. I must tell you that last year I called a government agency in my state to inquire about the maturity of the bonds and was quite shocked that they were not mature after 13 years. I did not purchase the bonds myself and told when I recieved them that they would mature in 10 years. I had them put away and didn’t really look into them until my second child began college, fall of 07. When I called the agency I was told that the bond could not be used for graduate school or after she turns 21 if they are in my name even though she would still be my dependent. I was then told I could transfer the bonds into my childs name and she could wait until the bond was mature and use it for school or whatever she wants, but would be taxed on it. So I am very confused and I believe that I might have got some incorrect information from my state agency and I have tried to read the irs’s information on the bonds but that is confusing as well. I even spoke to an irs agent this morning and she didnt even know what the rules were it took her 30 minutes to go over this questionaire with me…she seemed to be learning right with me! Then she said this is all for 2007 tax year and it all could change in 2008? So I am totally confused and thought there must be an easier way to get a few questions asked.

  93. Hi Bev,
    I’m really not qualified to give you advice in this way as I’m not a certified financial expert,. I can, however help you with facts and point out some analysis.

    The first thing that struck me, by the way you phrased your comment, is that you seem to have already made up your mind and are looking for someone to corroborate your choice.

    Also, knowing some friends in Med School, I can tell you that she’s going to end up with a lot of debt, and $2,000 difference is small in comparison.

    You two probably have experience with the federal Stafford and Parent PLUS loans. Your daughter can still get federal Stafford Loans in medical school, and she’ll be eligible for higher limits. She’ll also be eligible for federal GradPLUS loans, which are essentially like PLUS loans for graduate students but are in the GRADUATE’s name – not the parent’s. And private loans are a last resort – use Federal money first!

    I suggest you visit GradLoans.com to learn about your options and the federal Department of Education’s EFC Calculator to help estimate your Expected Family Contribution. Once you see the solid numbers, I think you’ll have a better idea of what will be best for both of you.

    Good luck!

  94. Beverly said,

    I have a question about an EE bond. My mother’s dying wish was to take her estate money and purchase education bonds for her grandchildren. The Bonds were purchased 12/95 and in the parents (my) name and will mature in 2012. My daughter is 21 and graduating from college May, 2009. She plans on attending graduate school in the fall of 2009. She will remain my dependent as long as she legally can by tax law. My daughter is going to medical school so she will be in school for sometime.My question for you is should I cash in her 10,000 bond for the current value of 8,000 and use it to pay for her last semester of her under-graduate college, or wait until it matures in 2012? I am a single parent and make a modest income as a school teacher and I would like to take full advantage of the tax breaks allowed for using the bond for educational purposes.
    This has been weighing heavily on my mind and I really appreciate any help you can give me.

  95. Shirlyn Kim said,


    The website answered my questions precisely! Thank you!


  96. Shirlyn,
    I believe the answer to both your question is yes, but here’s a link to great FAQ you should read to gain more information:


  97. Shirlyn Kim said,

    I will have two kids in college next year–one undergrad and one grad students. According to FAFSA, the grad student will be considered an independent student and thus she won’t be required to submit parents’ information. However, I plan to claim both kids as dependents on my 2008 tax returns, and the grad student may also file her own return (she had about $8,000 income from part-time jobs). So here are my questions:

    1. Can the grad student file the FAFSA as an independent student even if I claim her as a dependent on my tax return (we’ll also claim tuition deduction for 2008-09 tuition)?

    2. Can I state on the undergrad’s FAFSA that there will be two college students in our household for 2009-10 school year?

  98. Mike,

    The way I read it is that question #87 refers to personal finances and #89 refers to privately owned businesses with more than 100 employees.

    Another reason I believe this is the case is because there was a small uproar last year because for the past few/several years small business owners were penalized – their businesses were treated as personal capital, even though a small business owner often cannot access all their capital as it is tied up in business-related items.

    To be certain (as I haven’t been able to track down sole proprietorship vs.LLC vs. S-Corp, I would call your child’s financial aid office for clarification.

  99. Mike said,

    I own a business which is set up as a sole proprietorship. It is NOT an LLC or S-Corp. It has less than 100 employees. In fact, I am the only employee in the business. The business has a Checking Account which reads my name DBA the business name.

    Question 87 asks: What is the balance in Cash, Savings and Checking Accounts? Do I need to include the Cash Balance of this Business Account?

    Question 89 asks: What is the current net worth of your parents business but then states do not include the value if fewer than 100 employees? I assume I don’t have to report any assets owned by the company?

    If I have to include the business checking account in Question 87 wouldn’t it make sense to spend that cash on business inventory thereby reducing the cash on hand in the business account and sheltering it in the business itself?

    Thank you for you advise.

  100. Yes, having two daughters in school at the same time will affect EFCs for both schools.

    I’ve just reviewed the latest draft of the FAFSA that you will fill out in January, and you are asked how many people in your household will be attending college during the 2009-2010 academic year, and that will affect both your EFC and the aid packages from both daughter’s schools.

    • willie brooks said,

      i also have two children that will be in college this year – when filling out the fafsa, how do i or do i have to report one of my children living in an apartment rather than in the dorm – does this effect fin aide

  101. Penny said,

    If we are currently repaying a parent loan for our oldest daughter’s college education will it effect our expected family contribution for our youngest daughter who is getting ready to enter college for the first time?

  102. Hi Janet,

    Here’s a good article explaining why you want to get the money out of your child’s name:

    You’ll want to shift the money before the school requires you to report on your child’s assets. Colleges are getting wise to this trick, and some now require you to submit financial data for both the child’s senior AND junior years. But really it depends on the school.

  103. Janet in MN said,

    You suggest liquidating the EE savings bonds and putting the money into either a parent’s account or a grandparent’s account. Two questions: 1. When should the bonds be liquidated? 2. Can the money be put into a younger child’s account?

  104. Bridget – you’ll want to talk to a tax professional. Many also have experience with the FAFSA. Indeed, if you have your taxes prepared by a professional, they often fill out the FAFSA for you for free!

  105. Bridget said,

    We’re just about to start filling out our first fafsa. We have three children. They each have savings bonds (EE). Do we need to report the bonds that are for all of the children or just the one going to college? The other two are not college age yet.

  106. Felix said,

    nevermind…disregard my above statement

  107. Felix said,

    Hi, I’m an independent student and my adjusted gross income was 11551….and my efc was 4500. I get chapter 31 benefits from the VA, but I don’t understand why my efc is so high

  108. Hello Janet and Diana,

    I believe what you’re referring to are questions 44 and 88 on the FAFSA. If I’m reading it correctly, I believe you need to list the net value of the savings bond.

    If the bond is in the student’s name, you’ll be expected to use that to help pay for college. If it is in the parent’s name it won’t count against you as much. If your child is not yet in school and you want to save that money, you’ll want to liquidate the money and transfer it to either a parent or more ideally to a grandparent to hold for the student.

  109. Diana Lorence said,

    What part of US EE Savings Bonds is required to be reported as assets on the student’s part of FAFSA = the Total Value of bonds – Total Interest or- the YTD interest only?

  110. janet spatoulas said,

    are EE Savings Bonds exempt from assets to report on the FAFSA?

  111. To answer your first question, read this post:

    As for your second, I can’t answer it for certain, but I do think it would reduce your chances for financial aid. You see, the Federal Governement does not take your primary residence into account when calculating your Expected Family COntribution. But if the money is just resting in a CD, I think it would be. Some retirement funds are exempt, but I do not believe CDs are.

    Good luck!!

  112. Susan Lindsey said,

    1) If parents of student are divorced, are both household sizes taken into consideration instead of the household size of one?
    2) If I were to sell my home, invest the equity and rent, will the fact that I have money invested in a CD reduce the chance of my child qualifying for financial aid?

    • Judy said,

      Our grandson is going to college this fall. He lives with his mother who’s FAFSA score was low. What grants and scholarships doesn’t pay for his Grandfather and I plan to pay. We would like to claim him on next years taxes since we are putting a substantial amount of money into his education, which might require cashing in an IRA. Since he lives with his mother when not away at school can her income still be used on the FAFSA but can we claim him as a dependent?

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