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February 16, 2010

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Definitely good tips to remember when completing the FAFSA. Fortunately the online FAFSA is getting more and more streamlined and geared toward helping to eliminate the more common mistakes that families/students encounter.

Next year the Department of Education is allowing families to automatically upload their tax information directly from the IRS to the FAFSA application. So, this should help to reduce some data entry errors. The upload process is currently available in beta testing for students just now filing the FAFSA for the 2009-2010 academic year. This testing should help to get rid of any bugs before it opens up to the masses in 2011. We can hope anyway...

Good tips. I would change number 10 though. Do the FAFSA with your child. I pretty much did the whole FAFSA all by myself. I asked my dad for his tax return and went to work. If I wasn't sure of something, I just asked.

Another suggestion for students: If your parents are divorced, fill out the FAFSA with the parents with the lowest income, assets, etc.

As a former high school student who filled out my own FAFSA, I'm a bit offended at #10. If your child does not understand what is an asset and cannot with a little reading of the instructions and logical thinking figure out what is a non-included asset, then maybe you aren't doing enough to financially educate your child. And from the rest of the tips, it sounds like most parents don't understand what a non-included asset is either.

By all means review the forms with your child and help answer questions. Basically, be a parent. If you are going to lump all 17-18 year olds (including presumably your own) into a group of assumed idiocy, why in the world do you expect them to get them into college? Although if you are filling out a FAFSA, at least you are trying to do it on someone else's dime.

"What does a 17 -18 year old kid know about finances?" Why whatever you've taught them of course. They will know nothing if you expect them to know nothing.

I'm sorry for the rant FMF, but that last part really pushed my buttons.

Any insights to this scenario?

We have 529s setup for all our kids, but it appears we have to include the balances for the younger 2 on the application of the oldest.

529s are in a child's name, so it doesn't seem right that they'd reflect as assets in relation to the oldest.

Regarding your 529 plans, there is not much you can do at this point but spend it on college for the eldest. My guess is that you have most likely lost money in the account or you may be right above break even. The 529 plan depending on your case, could hurt you more than help you if you are a financial aid candidate. If you do not have lots of reserves in your personal accounts I would take it out of the 529 and just put in a separate account for the student in the parents name. If you have gains in the account there will be some taxes and penalties on the gain. If your student is going to college in the next year or so it's better to preserve the money than try to grow it right now. One more drop and that would be it for the gains.

Hey Drew!

Stay away from the 529's like a plague. My son is going to a private school and we make less than $50,000 a year combined in PA with 3 kids. However, we did have $80,000 in a 529. (It was much higher a year ago by about 30%) The college gave us $10,000 off the total cost and leaving us the balance of over $43,000 to pay out of pocket. When we went to discuss this with the financial aid they said that because we have money, they are not going to us money. They said to spend all of the money in the 529 and we can discuss financial aid when you have depleted the account. This did not make any sense to us but we wanted to send our son to this college. It seems that we could of got more money if we did not have this type of account.

Great post; I so wish I'd had it before the February 15th FAFSA deadline many colleges use. Maybe next year?

Not bad, but not enough.

HOW do you "Legally and ethically show less income and assets as possible"??

I just filled out the FAFSA this past weekend for myself in the case I get into grad school. One thing about maxing out retirement plans is that there is a specific question about how much you put into a 401k, 403b, thrift savings, etc. during the year. Not sure how it affects that calculation, but I am sure it does in some way.

Overall it is a pretty simple form to fill out.

@kjaxx - at 17/18 I had no idea what my parent's income was, assets they held (other than the house and I knew they had investment accounts), etc. At that age my parents did not feel like their income, etc. was any of my business. In fact, I still don't know anything about their account balances, income, etc. Due to this I know there was no way I could have filled out the form on my own even though I can guarantee I had more financial acumen at that age than a lot of people twice my age. Maybe point 10 is harshly worded, but no need to get worked up. What seems easy and obvious to you and I may not be for someone else. Finances are not simple to everyone in world.

@Gabe-It is too late for your situation but I would recommend others to have the 529 plan opened by a trusted family member(aunt, uncle, grandparent, etc)for benefit of the student and that way it does not reflect in your FAFSA calculations.

Also.. in order to better position your FAFSA results, you want to make sure your students have very little assets or savings in their name. That money is weighted heavier in the calculation than that of the parents. If the student does have money in their name, be sure to spend this first so that it does not hurt you each year that you file the FAFSA.

"What does a 17 -18 year old kid know about finances...?" At that age, more than my mother, considering I did her taxes the last couple of years of HS AND all through college, and filled out the FASFA myself.

Otherwise a pretty informative post that I'll pass on to my HS senior sister (who likewise will be filling out her own FASFA). Although perhaps she's already had to turn it in.

I also have a serious issue with not including your child in the completion of the FAFSA. In fact, the student MUST play an active role in filling out the FAFSA for a number of reasons. First, the student is the one receiving the financial aid. Yes, the EFC is based on the assumption that the parent's will contribute to their child's education but in the end, it is up to the student to secure financing. That is why there is an option where the student is asked IF they are interested in student loans and/or work-study. The student is the one repaying student loans, not the parent (if they are a Federal Stafford Loan) they don't even cosign on a Stafford loan. I for one would not want my parents deciding whether or not I receive a Stafford loan. Second, the student must sign the FAFSA electronically. It is illegal for a parent to act as the student and register for a PIN on behalf of the student. Third, if your child is old enough to be going off to college, why would you not AT LEAST do the FAFSA together so you can begin to teach your child the autonomy they will need to be successful in college.

I think the factual information about the FAFSA is great, but I strongly urge students to do the FAFSA with your parent's assistance. As a college financial aid officer I have seen too many "helicopter parents" who do everything for their kids and then leave their kids to fend for themselves when they graduate. You are doing a severe disservice to your child by not allowing them to ease into their independence. I feel that completing the FAFSA on their own is an excellent way to begin this maturation process.

@CPA abroad - Yes, i agree that finances aren't simple for everyone in the world and a student may not know EVERYTHING about their parents' income and assets, but filling in blanks off a tax form is not difficult by any means. Yes, #10 is harshly worded and maybe it shouldn't bother me so much. However, I find the mentality put forth by the wording to be demeaning to real live thinking 17-18 year olds. There's too much stereotyping of the "younger generation" for my taste. I'm not very far out of that age group to feel comfortable with it. I believe the writer of the tips is doing these young people a disservice by assuming the group as a whole are financial idiots.

An 18 year old is a legal adult. We can send them off to war but heaven forbid they be allowed to fill out a form that has a direct effect on their future.

I very much agree with DJ Wetzel above. Include your child, please.

Definitely agree with the last two comments...

I think that by the time a kid is 17-18, they should have a good understanding of basic personal finance, not to mention getting along on their own. One thing though kjaxx...the stereotyping occurs because there is some truth to it. You are not like this, but for the other millions of 17-18 year olds across this country...they much rather know and care about who's going to win the next big reality show, or what fight took place on The Hills, ect. I'm not too far out of that age group either, but I can see it...it's just the state of our culture, it's where we are as a country. Your friends may not be like this either, but most of the 17-18 year olds that I've observed are simply not thinking about the serious things in life, personal finances being one of them. The seriousness is just not there.

I agree, the last statement was a little harshly worded but somewhat true. My son has a problem with his ATM account and we keep getting charged overdraft fees every single month.

It's $20 for the overdraft fee when he withdraws for the ATM. He just thinks that if he can keep pulling money out of the ATM everything is okay. This is just the lack of education on my part of not educating him on how things work.

I let him do the FAFSA and I reviewed it before he submitted the forms online. There were many questions that he had and some that I had as well on the form. We stumbled through it and it's submitted already. Questions about certain accounts and household assets like the fine jewelry, classic car, boat, baseball card collections, paintings, etc? I didn't know if I needed to include those items. It's part of my net worth and I do consider some of them an investment like the stamp collection and few rare paintings that have high value.

In light of the comment, as a parent make sure that you review the forms and not let your student be 100% responsible. After all, this is your families finances that you are dealing with not only your child's money.


Ultimately, it's the parents that are going to pay for the education not the student.I wouldn't let my son fill this out by himself just because of the mistakes that could have been made. I thought the process was educational for both of us.

I thought the form was easy, that's because we don't really have any assets or much income to report. I can see how a family with lots of investments and money can get confused about this process.

My son is not eligible for the selective services because he has Juvenile Diabetes,
so how would we handle this on the FASFA form? Also, our house is seriously upside down with regards to equity..there is NONE.

Re #10 - Wouldn't it make more sense to have your child learn responsibility by filling it out themselves and coming to you for the tax info they don't have? Isn't that a teaching opportunity? It's pretty basic communication to say "you fill out the form the best you can, and I'll come in with the info you don't have." The reason this rubs some the wrong way is that it has the voice similar to old ideas that 'oh no don't let women near your finances, they just couldn't understand!' It's about your kid's education. If they are that irresponsible, don't pay so much for college. Or better yet, make them pay for it and see if financial aid becomes a priority then.

I recently did a refinance on the home, I paid off credit card bills and I put $64,000 into the savings account. How do I report the $64,000 since it came from home equity of my primary residence. I have not done the FAFSA and we are hesitant to do so because of our income is over $225,000. Should we even apply for financial aid?

I guess I don't need to comment on #10 then :) (the author should have chosen words more carefully...)

Other than that, the best tip is that people should fill out the FAFSA ASAP starting January 1. You don't need to have filed your taxes yet and can use estimates.

MasterPo was SCREWED by "the system" when he attended college.

MasterPo's father passed away when he was in HS.
MasterPo's mother literally worked nights and weekends to help pay for college.
MasterPo maintained a 3.7+ average all college long (often having a 4.0 per semester).

What financial aid did MasterPo get? Jack Squat!!

Meanwhile kids living in nice homes in the ritzy parts of Long Island, parents owning their own successful businesses, and driving daddy's Porche/BMW/Corvette to school got boat loads of non-repayment aid.

MasterPo survived. And graduated with honors.

MasterPo now (after many many years of hard work) has the money (G-d willing and the market don't crash) to pay the tution for his kids at pretty much any school in the country, including room&board.

However, when it does come time to send MasterPo's kids to school he intends to do all that he can to SCREW the system back and get someone else to pay as much of the bill for his kids education while keeping as much $$$ in his own pocket!

Flame MasterPo all you'd like. Don't care.

What goes around comes around.

(Yea, MasterPo is PO'd about the whole issue. So sue me...)

Hey! Some of us teenagers aren't incompetent!
I'm 17 and i filled out the FASFA by myself, I see many have done the same.

But hey most teenagers are immature and easily distracted.

I am applying for FAFSA and need some help. I start a grad program in fall. I made $22,000 last year, and am still on unemployment this year. I have about $15,000 in savings, and $80,000 in investments. Is there anything I can do to still get Financial Aid?

I am thinking giving my savings to my parents and transferring my investments to my parents? Anyone else have any bright ideas? Or know the best way of transferring funds?

Chris --

Sorry, no suggestions from me. If you want, I can post your question, but I can't get it up until the second week in May. Not sure that's in time for you or not.

@Chris: Looks to me like your assets and income are low enough that you will get aid without any of the cheating you and some others suggest is OK.

I, also, disagree with #10. I had been working for a couple years when I went to fill out the FAFSA but given that I was under 24 my mother had to fill out her section. First year she did not do it because I "bugged" her... she was waiting till April 15th to do her taxes and I wanted it to do it earlier and showed her why. Second year she did not do it because she forgot, because... wait for it, I did not remind her enough. And btw, I knew all of these deadly mistakes when I was under eighteen, and yet my mother did not and she was thirty years older.

This was a really awesome post. I always worry whether my FAFSA is being filled out correctly or not. My EFC jumped up double what it was last year just because I'm living off campus now. I wonder if I screwed up somewhere.

Is my mortgage information supposed to be included somewhere in the form? Also ira contributions made need to be included somewhere? Need a little help to clarify this.

I have the same question as Paulette. Do I subtract the balance of my house mortgage from the total amount of my cash and savings assets somewhere on the FAFSA?
The information on investments kept saying not to include the house you live in as an investment...but this is my only investment. So where do I get to write in how much debt I owe on my house?

Doesn't seem fair that people with multiple cars, boats, vacation houses, land, etc. get to include their mortgages on their "TOYS" on their FAFSA to increase their eligibility for financial aid.

What if you listed your retirement dollars on fasfa....thats a big difference....anyway to get it back????? We paid full and didnt have much money now i know why.....

How do I know what to put in for Grants and Scholarships?

my income is 41,000.00 and after I pay my bills I have about $25.00 dollars in checking and $300.00 in savings my daughter has about $500.00 in savings.

I kind of resent that last one. I kept my finances in order all on my own from age 16 onward. The credit union that we are with was so impressed with me through the years that they gave me my first car loan when I had no credit or cosigner. Your blog is kind of alienating some readers by saying that young people are completely naive to this. (22 and married now.)

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