Article provided by Clint Willis, Money Magazine
If your child is filling out their Villanova application, or even if he or she is already enrolled, there's still time to boost his or her chance to qualify for grants and low-cost loans--but only if you make the right moves. Deadlines for FAFSA and CSS:
November 1 for Early Decision Applicants
December 1 for Early Action Applicants
January 15 for Regular Decision Applicants
April 1st for Returning Undergraduates Students
The FAFSA considers students for federal government aid and the CSS considers students for institutional aid.
1. Don't Ask, Don't Get
A family with a six-figure income may think they have too much money to qualify, but that isn't always the case. A grant worth several thousand dollars may be available, even for high-earning families that have other kids in school or for other circumstances. It pays to apply and see what happens. "I see families eligible for aid with incomes of $150,000 or even $200,000," says Chany. Also, some school-sponsored merit scholarships don't consider need, but you still have to fill out the form to qualify.
2. Sell Yourself Short
Schools typically count as much as 5.6% of assets in the parents' names (outside of home and retirement assets) toward your annual expected family contribution (EFC), the amount that you are supposed to come up with each year to fund your kid's schooling. The application asks you to list those assets as of the day you file the form, so you have until the last minute to reduce your exposure. Pay off credit-card debt to reduce your cash. And consider prepaying of part of your mortgage. Your home equity will rise, but most schools (especially public ones) don't count your primary residence as an asset.
3. Hide Your Money in Retirement Accounts
Money in IRAs and such don't count as assets. Therefore, make your 2019 and 2020 contributions before you file. And avoid using retirement account balances to pay for school, since those withdrawals will be calculated as income next year (22% to 47% of income goes toward your contribution, depending on how much you make). You're better off spending cash that's outside your plan.
4.Shop Right
Cars, PCs, furniture, appliances, clothing and other supplies you're going to buy for your college-bound kid don't count as assets. Buy them before you file for aid.
5. Steal from Your Kid
Have you set up savings or investment accounts in your child's name to reduce taxes? Uh-oh. Aid officers count a larger percentage (35%) of his assets toward your contribution. Solution: Use the money you've been saving for your kids to buy the items mentioned in Rule No. 4.
6. Play "Let's Make a Deal"
Schools issue financial aid offers in the spring, and even then, it's not too late to try for a better package. Document special circumstances and ask for a "professional judgment review." Schools often consider factors such as a job loss, high medical costs, private school tuition for siblings and business setbacks. Financial aid officers will generally try to work within their schools' policies to improve your award, particularly if the college views your child as a catch and if you (tactfully!) let the aid officer know that another school is offering more help.
7. Make Sure Grandma Knows the Score
Your folks should not give money directly to your child, which boosts his or her assets. Some grandparents write a check directly to the school--but many schools will increase your EFC by an amount equal to the gift. Grandparents should write the check to you or--better--open a 529 college savings plan in their own names, with the child as beneficiary.
TRICKY QUESTIONS
FAFSA QUESTION 35
"What was your (and spouse's) adjusted gross income for 2005?" STRATEGY: Don't misattribute Social Security payments to the student. Disabled or retired parents may receive Social Security benefits for children. Those benefits should be allocated to the parents' income (since it will count less to the aid office) even if they are taxed at the child's rate.
FAFSA QUESTION 73
"What was your parents' adjusted gross income for 2019?" STRATEGY: Don't be flashy. You may not have time to finish your tax return before you file the FAFSA. If you have to estimate adjusted gross income, be honest but conservative.
FAFSA QUESTION 74
"Enter the total amount of your parents' income tax for 2019." STRATEGY: Don't write in your withholding in place of total income taxes paid. You may have paid more or less than what was taken out of your paycheck. This common mistake could significantly boost your after-tax income.
FAFSA QUESTION 82
"As of today, what is the net worth of your parents' investments, including real estate (not your parents' home)?" STRATEGY: Don't include retirement accounts. A $200,000 IRA could boost your expected family contribution by more than $11,000 a year.
KEY CSS DIFFERENCES AND TIPS:
If your parents are divorced: Your non custodial parent (the one you don’t live with) may be required to fill out the CSS Profile application. If you don’t have contact with your non-custodial parent, you may be able to submit a waiver to colleges requesting that their information not be included. Be aware that some colleges might deny your request and require both parents’ income.
If you’re an independent student: You may still have to input your parents’ income information, even though you wouldn’t have to do so for the FAFSA.
1. Underestimate Your Home’s Value
According to Dan Maga, Vice President of American College Funding, “the number one mistake that families make in completing the CSS Profile is overestimating the value of their primary home.” Utilize Zillow’s estimate of your home and other sources to generate the most conservative valuation possible.
2. Shift Assets from Student to Parent
Like the FAFSA, student assets receive greater weight in financial aid determination than those owned by parents. Especially given that balances are considered solely on the day that you sign and submit the application, it is worthwhile to transfer as much as possible from students to parents while awaiting aid determination.
3. Document Irregularities
When a temporary change in assets is inevitable, it’s important to document and provide evidence so that financial aid representatives can understand the full picture. Any insurance payouts, 1099 income, legal settlements, unique bonuses, or other one time received payments that significantly boost cash or other asset balances can be explained by completing the Special Circumstances section and forwarding supporting documentation to the university.
4. Be Consistent!
It is best to fill out the FAFSA and CSS within a short window of time and cross reference both applications to ensure that the amounts accurately reflect each other. Universities may require both students and parents to swear to the accuracy of information as a condition of application for financial aid, and any inconsistencies in line items between the two forms can prolong or even suspend the application process.