Some schools and colleges are cutting fees and tuition to attract students, but education costs are still high. When I went to college, my tuition and fees averaged about $500 per year plus another $500 for books. Today, you’re looking at 10 times those costs—or more. Financial aid is critical to help cover those costs.
What is the FAFSA?
The Free Application for Federal Student Aid (FAFSA) is an application used by colleges, universities and private schools to help evaluate a student’s financial need. The whole process is done online. You can start an application and save it, adding information as you go along.
Generally, the information provided is that of the parent. However, once the student gets married or turns 23, only the student’s own household finances are considered.
To determine whether to use your own financial information or that of your parents, the FAFSA provides a tidy questionnaire. The fact that your parents are not helping you with your education costs is irrelevant; you must still provide their financial data. However, if you absolutely have no contact with them, you can provide evidence and use your own data. Naturally, getting this verified will take longer, so file early.
When must you file?
Each state has different due dates, as does each educational institution. You can find the information in the right-hand column of this FAFSA document. However, the earlier you file, the better. Some scholarship or aid programs issue their awards early in the year, first-come-first-served. Most sharp students try to file in January or February.
What information will you need?
You will want to start with both parents’ tax return data and the student’s tax return. Naturally, this data won’t be ready in January, but you will have the key W-2 and 1099 information. Have the tax pros make estimates of the other income and routine deductions. Indicate in the FAFSA application that this is estimated information. When the actual tax returns are filed, you can update the FAFSA database—the differences should not be significant. If there are major differences, be sure to offer an explanation for the higher or lower income. It may be wise to contact your financial aid office or officer about any major changes.
You may also have to research information about Sec 529 Plans or Qualified Tuition Programs (QTPs). Some or all of those assets might have to be included as part of the student’s assets, depending on who controls the account (parent, student, other family member). So read the instructions on that carefully, and be very careful about the information you do enter.
Take your time with the application. Contact the school’s financial aid office with your specific questions early in the year. Make sure you only include assets and income that are relevant to your application. Above all, be truthful. Don’t worry—you’ll get better at this each year!
Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including the new edition of Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.