February 23, 2007
What do you put on a FAFSA for blended families?
In this day and age, there are many blended families out there, so that the old phrase “Yours, mine and ours” is quite commonplace. Ok – but what do you put on the FAFSA for the various children involved??? Here’s a short answer from teh New York Times. A free subscription is needed to view the article.
School aid rules byzantine
Filling out financial aid forms is difficult enough, but it can be particularly challenging for today’s blended families.
Ask Bill from Elkton.
Bill is divorced and his two daughters live with his ex. He lives with his second wife and her son. He’s working on the Free Application for Federal Student Aid form for his stepson. Bill says it looks like his income will be included on his stepson’s FAFSA along with the income of the boy’s father.
“This seems like a double whammy,” he says.
How will the federal government and college financial aid offices consider his income for his two daughters and his stepson? he asks in an e-mail.
Kalman Chany, author of Paying for College Without Going Broke, says the FAFSA can be so confusing for blended families that he includes a section on it in his book under the heading “Soap Opera Digest.”
FAFSA requires the income of the custodial parent, in this case the mother, as well as the stepparent, Bill, says Chany. The earnings of the boy’s father are not included. (When Bill’s daughters fill out the FAFSA, his income won’t be included.)
This is for federal aid. Private colleges use different rules for awarding their own money, and might ask about the income of all adults, Chany says.
February 21, 2007
Are financial aid offices biased agains small business owners?
Here’s a really interesting article from SmartMoney.com about how private colleges and universities have a major bias against Small business owners.
A Financial-Aid Bias?
IF YOU HAVE a college-bound child in your home, I probably don’t need to tell you that April can be a stressful month. While high school seniors fret over what schools are going to admit them, their parents — along with the parents of current college freshmen, sophomores and juniors — anxiously wait to find out what next year’s financial-aid packages hold. I have to admit, however, that as we waited last year to hear from the four schools my daughter had applied to, I was relatively calm on both scores. Our daughter had already won early acceptance at M.I.T., and we thought it likely that she would get into the other schools she applied to. I, meanwhile, having seen the federal- and private-aid estimates of our financial need, was confident that we’d also be getting the assistance we’d require to be able to put our daughter through college without ending up in the poorhouse.
Well, I was right on one point: My daughter did indeed get accepted to her top picks. But along with those acceptance letters came the financial-aid packages. And those caught me off guard. That’s because they were about $4,000 to $5,000 a year less than I had anticipated.
It turns out that I’m not alone in my sticker shock. As a full-time freelance writer, I’m among the one in 11 American workers who is self-employed, and most private colleges and universities have a built-in bias against the self-employed when it comes to evaluating financial need. How so? They routinely disallow some of the most basic deductions we take for the expenses of conducting a small business — things like meals and entertainment, travel and depreciation. For the self-employed, these are a cost of doing business no different from a corporation’s spending on raw materials or advertising, but America’s private colleges add them back to income when they calculate the resources a family has available to pay for college.
It’s something that most self-employed parents may not realize, and with good reason: The financial-aid determination process is pretty much a black box. You put your data in, whether on the Free Application for Federal Student Aid (FAFSA) form handled by the U.S. Education Department or the College Scholarship Service (CSS) form processed by the College Board, send along last year’s tax forms and out the other end come scholarship and loan packages from the colleges that have accepted your child. How those numbers are determined is up to each school’s own financial-aid office. But there’s a surprising degree of sameness in the way these offices operate — and in the lack of explanation they provide to parents. And it’s no wonder they look so similar: They are all using the same playbook.
The College Board, a membership organization of most colleges and universities in the country, claims it doesn’t tell schools how to evaluate financial need. “We don’t tell them what to disallow or add back to income. That’s a decision made by each college,” says a College Board spokeswoman. In fact, however, the College Board does sponsor workshops that essentially do just that. For the past two decades in the Northeast, for instance, most college financial-aid directors have been attending the same annual workshop on evaluating parents’ financial-aid forms sponsored by the College Board and run by a Vermont-based accountant named James Briggs.
“He’s the guru,” says Heather McDonnell, financial-aid director at Sarah Lawrence College in Bronxville, New York. “We all schlepp up there once a year and he tells us what to look for. He makes it clear that when you walk into the world of the self-employed, basically there are a lot of people who present themselves in ways that are not exactly a reflection of their true cash-flow position.”
As a financial-aid officer at M.I.T. explains, freelancers who are willing to play fast and loose with the tax code may be misrepresenting some ordinary personal spending as business expenses. “You hear so much about people taking a whole group out to a restaurant and writing it off as a meal,” he says. Many school financial-aid officials say they are particularly skeptical about expense deductions when someone has a full-time salaried job, and the Schedule C is for a second-income activity.
Some of the caution is probably warranted. During an audit of FAFSA applications back in 1997, the U.S. Department of Education found that it had overawarded $109 million in Pell Grant scholarships because of fraud, though the overpayments weren’t just to students of self-employed families.
But for self-employed parents who don’t fudge their returns, the result is often financial-aid awards that are lower than they should be. After all, many of the expenses on Schedule C are the sort for which companies routinely reimburse their employees — and no financial-aid office would add a parent’s corporate expense accounts back to his or her income…
View the rest of the article here.
Scholars Suggest Simplifying Federal Student-Aid System By Eliminating A Lengthy Form
The Chronicle of Higher Education reports on a paper released Tuesday by two scholars at Harvard University’s John F. Kennedy School of Government.
Scholars Suggest Simplifying Federal Student-Aid System By Eliminating A Lengthy Form
“The federal student-aid system should be drastically simplified by eliminating a cumbersome application form and using basic information from tax returns instead to calculate eligibility for financial aid,” “Ms. Dynarski, who is an associate professor of public policy at the Kennedy School, and Ms. Scott-Clayton, who is a doctoral candidate there, say the form is too complicated. Furthermore, they say, it does not let students know how much aid they qualify for, and thus discourages many students from low-income families from applying to college and finishing their degrees.”
You can read the complete article from the Chronicle of Higher Education on-line. A paid subscription may be required.
February 20, 2007
Removing the FAFSA fear for low-income families
A novel approach to financial aid – have H & R Block fill out your FAFSA! Inside Higher Ed is reporting a novel experiment currently underway in the Cleveland area; random families who use H & R Block services will be offered free FAFSA filing services along with their tax preparation.
That low-income Americans are far less likely to go to college than their peers are is a fact; less clear are the reasons why. But one oft-cited explanation is that potential college students from lower socioeconomic groups are either unaware of how much need-based financial aid is available or intimidated by the process of applying for federal student aid.
In a memorable stunt at a news conference in September where she discussed the need to simplify that process, Education Secretary Margaret Spellings unfavorably compared the length and complexity of the Free Application for Federal Student Aid (FAFSA) to the standard federal tax form, and the American Council on Education and the Lumina Foundation for Education have begun an aggressive public service campaign aimed, in part, at lowering low-income students’ fear factor in applying for federal aid.
“We have all this financial aid, but it doesn’t seem to be reaching the people who need it most,” says Bridget Terry Long, an associate professor of education and economics at Harvard University, who has written widely about college access. “A lot of people just don’t understand how the system works. And there are lots of calls for simplication, but what does that really mean?”
Long and some fellow researchers are taking an unconventional approach to the problem. The experiment, which is aimed at lower-income people who have teenage or college-age children or are potential college students themselves, seeks to gauge whether making it easier for low- and moderate-income families to apply for financial aid improves their college-going rates. What is unusual, however, is the research design — offering taxpayers a painless way to turn the information on their tax forms into a financial aid application — and the sponsor: H&R Block, the tax preparation company.
Here’s how the project, which involves researchers at Case Western Reserve University and University of Toronto in addition to Long, works: Randomly selected taxpayers with incomes below $45,000 who seek help from their taxes from H&R Block offices in and around Cleveland, Ohio, will be offered help filling out their FAFSA forms (a control group will receive only a brochure with publicly available information about attending and paying for college).
H&R Block’s tax preparers, working with software the company and the researchers jointly created, will help transport the applicants’ tax information into the federal financial aid form (more than half of the FAFSA information comes from the tax form), and help them collect the information for, and complete, the rest of the form. The hypothesis is that using tax data to automatically fill in a large number of answers to the 108 questions on the financial aid form, and offering personal help in filling out the rest, will make the FAFSA less daunting than it might otherwise be.
Next, company representatives, trained by the researchers, will give study participants projections of how much state and federal financial aid they may qualify for, and how far that would go in covering the cost of attending selected colleges in the area. “When we finish that interview, we give them a piece of paper that says, based on the information we’ve gathered today, here’s the tuition and here’s the aid you’d be eligible for,” says Eric P. Bettinger, associate professor of economics at Case Western…
February 6, 2007
Helping families with the FAFSA
Kudos to my co-worker Chris Penn for helping out families with the Financial Aid Process! Here’s a great article about Chris and the eastern Massachusetts College Goal Sunday.
The Experiences Of A College Goal Sunday Volunteer
Experiences from the 2007 Massachusetts College Goal Sunday (CGS) event were chronicled on Monday by CGS volunteer Christopher Penn, the host of the Student Loan Network’s Financial Aid Podcast. Monday’s edition was #458 in Penn’s series and is available via the podcast’s Web site.
Penn joined a cadre of volunteers at the Jan. 28 state-wide event where families could get free, on-site professional assistance filling out the Free Application for Student Aid (FAFSA) and talk with financial aid professionals about available student aid and how to apply for it. Similar events are held as part of a nationwide College Goal Sunday program which is funded through the Lumina Foundation for Education and managed by NASFAA.
Among Penn’s observations during his “rewarding, eye-opening, and educational” experience was the fact that many families became very frustrated while attempting to fill out the FAFSA.
“I’ve argued that you don’t need a financial aid consultant to figure out how to pay for college, but now I understand why people hire consultants and why there is a market for it,” Penn said.
He observed many families become frustrated with the process because it had never been explained to them.
“If you feel frustrated, it is not your fault,” Penn assured listeners.
Fortunately, the approximately 90 families attending College Goal Sunday in Framingham, Mass. were helped by “some of the most knowledgeable, enthusiastic people,” according to Penn. He was especially impressed with the depth of expertise that financial aid administrators from neighboring schools brought to the event.
After helping a number of families at the event, Penn noted several weaknesses in the online FAFSA process, including th inability to save the application in steps, seven, eight, and nine. He said families he worked with lost countless applications because the save button disappeared after step six.
Penn advised students and families to complete the 1040 tax form before attempting to complete the FAFSA. He also urged applicants to be as accurate as possible when filling out forms, noting that families can miss out on money when they use rough estimates instead of accurate numbers.
Penn felt the inspiring and motivational aspect of the day was observing families from all walks of life striving for the same goal, a bright future for their children. They were all doing their best to get their children a college education so they could have a better life, he said.
By Haley Chitty
NASFAA Assistant Director for Communications
January 12, 2007
The Rising Cost of College Education
Here’s an interesting article from USA Today on the rising cost of college education:
Rising costs make climb to higher education steeper
By Sandra Block, USA TODAY
“At a time when even entry-level jobs often require a bachelor’s degree, hardly anyone disputes the importance of a college education. Even so, many parents and students struggle to understand why college costs so much.
There’s no easy answer.
The House is scheduled to vote Wednesday on a Democratic plan to reduce the cost of borrowing for college. But easing student-loan interest rates won’t provide much relief, critics say, unless lawmakers can somehow also slow the inexorable rise in the cost of college.
Laurel Hinshaw of Anchorage says her daughter, Marissa, is attending Bemidji State University in Bemidji, Minn., because she couldn’t afford a school closer to home. Marissa, a freshman, looked into several West Coast schools, Hinshaw says.
But “even with the scholarships they were offering, tuition was way out of reach for us,” she says.
In the past five years, the average cost of in-state tuition and fees at public colleges has jumped 35% — after adjustment for inflation — according to the College Board. In the past 25 years, the average cost of tuition and fees has risen faster than personal income, consumer prices and even health insurance.
For academic year 2006-07, the average cost of tuition, room and board at a public university was $12,796; for a private school, the total averaged $30,367.
During the same period, the amount of federal direct aid — money that doesn’t have to be repaid — has declined, forcing more students to borrow. Nearly two-thirds of college graduates leave school with debt, up from less than half in 1993, according to the non-profit Project on Student Debt. And among those with loans, the average debt has jumped from $9,250 in 1993 to $19,200, a 58% increase after adjustment for inflation…”
Read the rest of the article from USA Today here.
January 3, 2007
Should people with rich parents fill out the FAFSA?
I hear this question a lot. In my opinion, the answer is an unqualified YES!!!
Why, you may ask? Well, lets look over a few points –
- It can’t hurt. If you’re wealthy enough to pay for college, filling out the FAFSA won’t penalize you, you simply won’t get any federal loans. Which you wouldn’t anyway.
- If your situation changes, it can help. Say something suddenly happens and your situation changes drastically to the point where you really need loans. Submitting the FAFSA even while “rich” can help document your changed situation in case anything should happen.
- Scholarships. Even rich people try to get scholarships, for example for recognition in a given field. Many scholarships want you to file the FAFSA. True, most of these are need-based scholarships, but it really is better to have all your bases covered.
- Teach your kids the value of a dollar. Yeah, it’s a bit hokey but it’s true. I’m remembering in particular one of my husband’s college roommates. He’d call home every semester or so and ask for a few thousand dollars! He didn’t understand the value of money as he’d always had lots and never had to pay for anything himself. He actually thought there were no poor people in the United States!!! We managed to inject a little bit of reality into him, thankfully, but I can’t stress enough that it’s important for your child to learn budgeting BEFORE they go to college. This includes people with an unlimited supply of funds. Filling out the FAFSA with your child can be an important educational tool in learning where money comes from, where it goes and how to budget it.
January 2, 2007
More FAFSA Tips
Here some more FAFSA advice, from FAFSAOnline.com.
FAFSA Online Secret #1 : Reduce your Adjusted Gross Income
FAFSA Aid = f(1/AGI)
Okay, you probably saw that and might have panicked. Here’s what it means. Your FAFSA aid, your federal financial aid, is inversely proportional to your adjusted gross income.
What is Adjusted Gross Income?
On your IRS tax return, Adjusted Gross Income (AGI) is the amount of money you make per year, after standard deductions and adjustments. How is the adjusted gross income computed?
AGI = Income – Deductions
The goal, and FAFSA secret #1, is to reduce your adjusted gross income. Now, there are good ways and bad ways to do that. Bad ways include losing your job and sources of income. Good ways to reduce your adjusted gross income include:
- Make the maximum contribution to your IRA.
- Make the maximum contribution to your retirement plan. (401k, etc.)
- Donate as much as possible to charity.
- Consolidate your federal student loans. Interest paid on federal student loans is deducted from your AGI. Consolidation initially (as with all loans) has you pay more interest up front than principal, so consolidation reduces your AGI more than unconsolidated student loans.
- Did you move? Other deductions include moving expenses.
- Use health savings accounts (flex spending) – these are deducted from your AGI, so if your employer offers them, take advantage!
Best advice: even though it costs money, consider using a professional tax preparation specialist (i.e. H&R Block, etc.) for your taxes if your child is in college or coming up on college in three years or less. Though you’ll pay to have your taxes done, you can discuss with a tax professional all the different options for reducing your apparent AGI, which will in turn make you more qualified for federal financial aid.
Important tip: be sure to keep your student loan paperwork throughout the year, and if you consolidate your federal student loans, keep the paperwork for both the original company and consolidating company – you’ll need both on hand when you do your taxes.
Bonus note: some tax preparers do not charge until your taxes are completed and ready to be filed. If you are unsure about how this tip will affect your tax preparation, consider at least visiting one of these preparers and making use of their expertise.”
Be sure to read the rest of their tips online at FAFSAOnline.com.
December 27, 2006
FAFSA – a refresher course
Since FAFSA season begins in 4 days, I’m bringing you a refresher on what the FAFSA is and why you need it.
Students must complete and submit the Free Application for Federal Student Aid (FAFSA) to the U.S. Department of Education every year in order to qualify for financial aid – including loans! It’s not required but you REALLY want to submit this every year, by January 30th is possible.
Why do I say January 30th if he deadline listed is in June? Because the financial aid world is first-come, first-served. You want to get this form filled in as soon as possible, ideally as soon as you get your tax forms.
Tax forms?!?!? Yes, I said tax forms. I mean stuff like your W-2 and your student’s W-2. THe FAFSA asks about household income and related items, in order to determine how much your family can afford to pay for college. Here’s the info you need to have on hand to fill it out the 2007/2008 FAFSA:
- Your Social Security Number (can be found on Social Security card)
- Your driver’s license or state ID (if any)
- Your W-2 Forms and other records of money earned
- Your (and your spouse’s, if you are married) 2006/2007 Federal Income Tax Return – IRS Form 1040, 1040A, 1040EZ, 1040TeleFile, foreign tax return, or tax return for Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, the Marshall Islands, the Federated States of Micronesia
- Your parents’ Federal Income Tax Return (if you are a dependent student)
- Your untaxed income records – Social Security, Temporary Assistance to Needy Families, welfare, or veterans benefits records
- Your current bank statements
- Your current business and investment mortgage information, business and farm records, stock, bond, and other investment records
- Your alien registration or permanent residence card (if you are not a U.S. citizen)
More FAFSA info coming soon!
December 20, 2006
Get Ready to File your FAFSA…January 1st
Need to complete your Fafsa for 2007-2008 school year? Visit www.fafsaonline.com on or after January 1st and the application will be available. Remember, you do need to complete your Fafsa each academic year in order to be eligible for Federal Aid. Once you complete your application online keep your eyes open for your Student Aid Report. This will provide a summary of the information submitted on your Fafsa. Your school will also get a copy of the SAR and will then send out a Financial Aid Award Letter. Your award letter will state what Federal Aid you are eligible for. Make sure if you are awarded a Stafford Loan that you complete your Master Promissory Note as well. This can be done online at www.staffordloan.com.
The Student Loan Network: Stafford Federal Student Loans, Parent PLUS Loans, Student Loan Consolidation, Private Student Loans
Student Loan Info for Parents 