Easy Ways to Get Help With the FAFSA Do you want assistance with college costs for your student? Think carefully about your approach to completing the FAFSA.
The majority of American colleges and universities, including state universities, determine your “expected family contribution”—that is, how much they believe a family can afford to pay for books, room and board, tuition, and other education-related expenses—using the Free Application for Federal Student Aid.
The amount of need-based aid a student is eligible to receive is determined by the difference between the sticker price of a school and the estimated family contribution. This assistance may take the kind of loans, work-study positions, government grants, or grants from the school.
Families must submit an FAFSA application for each academic year. It makes sense to begin planning while your student is still in high school because it is based on financial data that is two years old. However, there are still last-minute decisions you can make to optimize financial aid even if you didn’t start planning.
Contents
Easy Ways to Get Help With the FAFSA
Here are seven strategies to make sure the FAFSA is giving you the most amount of money:
1. Fill out the financial aid application
According to Overland Park, Kansas-based college and student loan advisor Jason Anderson, some families make the grave error of not completing the FAFSA at all.
Despite not being eligible for non-repayable grants, completing the FAFSA enables you to obtain affordable student loans. You can also lose out on state scholarship programs if you don’t have it.
2. Keep taxable student income around $7,000
A student is allowed to earn and retain $7,040 for the 2022–2023 academic year (based on their 2020 income) in addition to the aid formula.
Any amount over that reduces your eligibility for aid because half of it goes toward the expected family contribution. To make that much money at $15 per hour, a student would have to work forty hours a week in a summer job for over twelve weeks.
It’s hardly the worst decision you could make if your student makes more money than the protected amount. However, consider it this way:
Work over that $7,040 is effectively paid at half the stated hourly rate because each dollar you make takes away fifty cents from your aid eligibility. Considering that information, select your work shifts.
3. Minimize student assets
A student’s assets are also taken into account by the FAFSA, which determines that 20% of their investments and savings will go toward the estimated family contribution.
All assets are available for use, including those in bank accounts, non-retirement investment accounts, and UTMA or UGMA accounts.
What’s the lesson learned? Spending down their student accounts makes sense. If a student has significant benefits or assets from a UGMA or UTMA account, they should think about using those funds to cover pre-college costs.
A car, lessons, orthodontic braces, a musical instrument, private school tuition, or educational travel are all examples of expenses that can deplete an account.
4. Postpone parental income
According to Chanhassen, Minnesota-based financial expert Mark Struthers, you can keep between 22% and 47% of your adjusted income after the formula provides you with a living allowance based on household size and taxes.
The precise amount is determined by a complex computation that takes into account the ages of the parents, the number of children, and other elements.
5. Don’t report assets that the FAFSA doesn’t measure
Retirement funds and the value of a family’s primary residence are not taken into account by the FAFSA. According to Anderson, sometimes individuals list them nonetheless. This is an error.
6. Minimize parental assets that are measured
The projected family contribution on the FAFSA is calculated using up to 5.64% of non-protected parental assets. A farm that is not the principal family residence, cash, savings and checking accounts, investment accounts, investment properties, 529 accounts, tax credits, and the net worth of any firm with more than 100 full-time employees are examples of non-protected assets.
To cover your expenses, including college tuition, you most likely need to withdraw part of the cash you’ve kept in the bank. Additionally, you should try to maintain a three- to six-month emergency fund to cover household needs.
Pay off (or reduce) credit card debt, auto loans, and student loans before submitting the FAFSA in order to lower any account balances that exceed your actual spending.
7. Plan how you’ll spend money in a 529 plan
Parental assets include 529 plans that are owned by parents. A grandchild is designated as the beneficiary of a 529 plan owned by grandparents in certain households.
Although the asset is not shown on the FAFSA, the student is still considered to be earning income when funds are taken out of the 529 plan to cover educational costs. (If you’ve been taking notes, you’ll know that the amount of help that students are eligible for is strongly weighed against their income.)
If you can afford to wait, don’t access the grandparent-owned 529 until the student’s junior year of college to avoid this problem. The 529 withdrawal will not be visible to the FAFSA because it is based on a financial snapshot taken two years ago.
