For parents of college students and prospective college
students (Fall of 2012), financial aid forms need to be submitted
soon. Typically financial aid forms for prospective students are
due in January or February, while forms for returning students
are due in March or April. Be sure to check the deadlines for
each school where the student is applying and/or attending.
Depending on the school there may be multiple forms to fill out.
The first step is to determine which forms are needed:
Free Application for Federal Student Aid (FAFSA)
This is the basic form required for financial aid at all
colleges including all federal student loans, such as Stafford
Loans and PLUS loans. The FAFSA form asks for information such
as student and parent income and assets, but does not take into
consideration retirement assets or the equity in the primary
residence. The FAFSA will determine the family's "Expected
Family Contribution", which is the amount that the family is
thought to be able to pay - often a higher number than the
parent thinks they can afford! Information and forms can be
found at www.fafsa.ed.gov .
Even if the family does not think they are eligible for
need-based aid, but wants to access Stafford loans and PLUS
loans, the FAFSA must be filled out. Certain merit scholarships
may also require completion of the FAFSA forms.
Most students who fill out a FAFSA form are eligible for
unsubsidized Stafford loans. First year students can borrow
up to $5,500. The interest rate on unsubsidized loans is
currently 6.8 percent and is not based on the applicant's
credit score. Need-based subsidized Stafford loans now have
an interest rate of 3.4 percent in 2011-12 and the interest
does not accrue while the student is in school.
Federal Direct PLUS Loan:
Parents can also borrow through the Direct PLUS program.
Parents can borrow up to the cost of attendance less any
other financial aid received. The interest rate is presently
7.9 percent and is charged beginning with the disbursement of
the loan. Please note that certain fees apply to these
lending programs, so read the details carefully.
CSS PROFILE Form:
Some private colleges use a different methodology for
calculating financial aid and require the College Board's CSS
PROFILE form. A list of schools requiring the CSS PROFILE form
can be found on the College Board website . The CSS PROFILE
form asks more detailed and broader financial questions than
the FAFSA and takes into account other factors such as the
equity in your house. Some schools may also request a copy of a
tax return, so if possible, try to get your taxes done
Occasionally a college may require supplemental information, so
be sure to check with the school.
For divorced parents and parents who never married, the rules may
vary as to what is required, so check with the school as well as
FAFSA and CSS Profile.
For prospective students, beginning in the Fall of 2011 all
colleges are required to post a "net price calculator" on their
websites that help families figure out what freshman year will
cost. The calculations are designed to be an estimate; the
financial aid office will have the final say on the actual
financial aid award. It is based on the "Expected Family
Contribution" computed based on information on the FAFSA form.
The process of financial aid should also involve investigating
grant opportunities from sources other than the college. There
are numerous opportunities for scholarship and grants and many
have a separate application process. School guidance offices are
often the best place to start the investigation.
In addition to financial aid, there are several tax advantages
for the families of college students. The American Opportunity
Credit replaces the Hope Credit through 2012. The American
Opportunity Credit is a maximum tax credit of $2,500 and has a
higher income limit qualification than other tax benefits. Read
IRS Publication 970, "Tax Benefits for Education" to determine if
you are eligible. Other tax benefits may be available to you
depending on your circumstances.
FPA Member Jeanne Gibson Sullivan, CFP®, is a financial
planner and principal of Financially in Tune in Wakefield, MA and
a parent of two sons - a freshman in college and a high school