Common FAFSA mistakes (Part II)
May 2, 2012
Ian Welham shares more of the most common FAFSA mistakes
In my previous blog, I began a list of the Top Ten mistakes we see parents make when it comes to the Department of Education’s Free Application for Federal Student Aid (FAFSA). I listed the first 5 FAFSA mistakes. In this blog we’ll cover the final 5 FAFSA mistakes.
But first, three quick reminders:
1) Everyone should fill out the FAFSA, available online at www.fafsa.gov.
2) Financial aid is given out on a first-come, first-serve basis. If you file too late, you could be out of luck.
3) You have to submit a FAFSA each and every year. (I’ll pause a moment to give you a chance to scream.)
OK, feel better? Here are the other mistakes you want to avoid.
6) Saying No to Work-Study – One of the questions on the FAFSA is, “Are you interested in work-study.” Always answer yes. It does not mean that you will automatically get it. It also does not mean you have to take it should you get it. You’re under no obligation either way. So there’s no need to shut yourself out of this possibility if you’re unsure. Might as well see what’s available.
7) Misstating Income – Do you contribute to a 401(k), 403(b) or any other pre-tax retirement account? If so, you are required to add back any contributions from the previous year to your income on the FAFSA. As a result, the income you report on your FAFSA will often be higher than what you might list on your tax return.
8 ) Misstating Investments – Where the FAFSA asks for your investments, do not include retirement assets here. If you do, you will be overstating your assets and potentially reducing the amount of aid you might receive.
9) Misstating Real Estate Assets – Another common mistake that families make is they include home equity in the value of their primary residence. For FAFSA purposes, primary residence home equity is not included.
10) Filing for the Wrong Year – This may seem like an obvious one, but it’s a bit tricky. When you submit a FAFSA, it’s always for the next upcoming school year, but the financial information you enter is based on the previous year. Just make sure to submit the FAFSA for the year your student will be in college for the upcoming fall school year – NOT the school year they are currently in. If you get this wrong, your student will receive zero aid next year.
One last thing… Last time, I suggested you use the online FAFSA form, never the paper version. Every few minutes make sure to hit SAVE. I’ve met many parents who spent hours completing the FAFSA and lost all their information when their computer froze or the government’s server locked up. That means starting from scratch. Save yourself the frustration and hit save as you go.
Common FAFSA mistakes (Part I)
April 30, 2012
Ian Welham reveals the most common FAFSA mistakes
It’s very important that you fill out the FAFSA correctly. Depending on which source you believe, it’s reported that somewhere between seven out of 10 and nine out of 10 FAFSA forms are submitted with errors. These mistakes can be costly because they may prevent you from getting the college aid you deserve.
I’ll share with you the Top Ten mistakes we see parents make when it comes to the FAFSA. I’ll include five FAFSA mistakes in today’s blog, then I’ll follow up with five more FAFSA mistakes in my next blog.
1) Not submitting – Some parents believe they make too much money to bother completing a FAFSA. Here are three reasons why you want to submit the FAFSA regardless of income:
1. income is only one of 7 factors used to determine college aid eligibility
2. your eligibility for aid goes up if you have more than one child in college at the same time
3. you never know
2) Procrastinating – You do not need to have your tax return done in order to submit your FAFSA. The Department of Education allows you to submit a FAFSA based on estimates (which you can go back and correct later, if necessary). Remember: financial aid is doled out on a first-come, first-served basis.
3) Not filing online – You have the option to file electronically or through the mail. It’s a big mistake to not use the online version. If you make a mistake on the paper version, and you have to make a correction, you’ll lose time and your place in line while waiting for the correction to be processed (we’re talking about the government here; they don’t exactly operate at the speed of light). The online version is much more time efficient, is easier to make corrections, and includes an online help feature and a simple renewal process (yes, you have to submit a FAFSA each and every year).
4) Confusing who “you” is – The Dept. of Education makes the assumption that it’s the student who is filling out the FAFSA form (that’s a knee-slapper). When the question refers to “you” or “yours,” it is actually referring to the student. So for example, when it asks for the student’s email address, enter your email address. That way, all communications come to you for review.
5) Not knowing the rules for divorced parents – In a divorce situation, the financial information that should be used is the income and assets of the parent who the child spends the majority of their time with. The assets and income of the custodial parent’s new spouse are also included (if there is one).
See you next time with the rest of the top 10 FAFSA mistakes we see parents make.
Tax breaks for parents of college students
April 27, 2012
Ian Welham reviews tax breaks for parents of college students
Even though tax season is over, it’s not too late to cash in on some education-related tax benefits. Check your tax return to see if you included these credits. If not, you can file an adjusted return.
American Opportunity Tax Credit. The purpose of this credit is to help parents and students pay part of the cost of undergraduate education. Originally scheduled to expire at the end of 2010, it has been extended through 2012. You are allowed to deduct up to $2,500 per year per student for qualified tuition, fees and course materials paid during the taxable year. To qualify, your income must be $180,000 or less for married couples filing jointly, or $90,000 for single taxpayers. (Note: your tax filing status cannot be married filing separately.) This credit can only be claimed during the first four years of college. To claim this credit, use Form 8863, Education Credits.
Lifetime Learning Credit. While the American Opportunity Tax Credit is for the first four years of college, the Lifetime Learning Credit is available for an unlimited number of years, and can be used for undergraduate, graduate, and job skills courses. The student does not need to be pursuing a degree, and the credit is available for one or more courses. The Lifetime Learning Credit is equal to 20% of the taxpayer’s out-ofpocket expenses, up to a maximum of $2,000 each year. To qualify, your modified adjusted gross income (AGI) must be $120,000 or less for married couples filing jointly, or $60,000 for single taxpayers. (Note: your tax filing status cannot be married filing separately.) Costs such as room and board, insurance, medical, and other personal expenses are not considered qualified education expenses. To claim this credit, use Form 8863, Education Credits, attached to Form 1040 or 1040A.
If you are paying qualified education expenses for more than one student in the same year, you can claim the American Opportunity Tax Credit for one student and the Lifetime Learning Credit for another student in the same year. A taxpayer cannot, however, claim the American Opportunity Tax Credit, the Lifetime Learning Credit, and a tuition and fees deduction for the same student in a single year.
What about interest on student loans?
The interest paid on student loans may be deductible under certain conditions. The maximum deduction for interest is $2,500 per year. To qualify, your modified adjusted gross income (AGI) must be $150,000 or less for married couples filing jointly, or $75,000 for single taxpayers. (Note: your tax filing status cannot be married filing separately.) The deduction is claimed on Form 1040 or 1040A as an adjustment to gross income. As it stands now, this deduction is scheduled to expire at the end of 2012.
5 Most Important Questions to Ask the Financial Aid Office
April 25, 2012
Ian Welham shares 5 vital questions to ask the financial aid department
If your child is a high school senior, you must find out the financial aid deadlines at each college and make sure you get the financial aid forms in before the earliest deadline. In addition, you want to stack the odds in your favor by asking these 5 vital questions to the financial aid officer at each university:
1. Does your school guarantee to meet 100% of my child’s financial need at your school, and if not, what proportion of need does your school meet for the average student?
Most schools do NOT meet 100% of a student’s financial need. It is important for you to know this information before your child spends time and money applying to a school that will NEVER give you the money you require to attend.
2. If my financial need remains the same for the next 4 years, will my child receive the same financial aid package every year?
Some schools “front load” their aid package in year 1, and then reduce your aid in years 2, 3 and 4. These schools know that students are reluctant to transfer after they’ve already attended the college for two semesters.
3. If my family’s financial need increases in year 2 at your college, will your financial aid package be adjusted accordingly, or will it remain the same?
You want to know this up front, so you won’t have to make a tough decision later.
4. If my child doesn’t apply for financial aid in his/her freshman year, can s/he apply for aid in future years?
In some cases, it may make sense for you NOT to apply for aid for the freshman year—especially if you have not done planning and you have all your assets in the wrong places. However, some universities have policies whereby they give priority consideration to students who are already receiving financial aid. Find this out before you apply.
5. What is your school’s policy on packaging outside scholarships into a financial aid award package?
Some colleges will replace the free money they were going to award you with the free money you found. So, in effect, you gain nothing by finding an outside scholarship. Other schools will allow the outside scholarship to replace the loan money they were going to give you. Obviously, it’s better if they replace loan money rather than free money.
Failure to ask these vital questions could end up costing you a lot of money and frustration. Make sure you take the time to ask each college or university these questions. I promise, it will pay off.
College “Financial Aid Night” Can Cost You
April 23, 2012
Ian Welham cautions about College Financial Aid night at your high school
At our recent college-planning workshop in Summit, a parent told us that our information was substantially more valuable than what she learned at her high school’s “Financial Aid Night.”
We hear that a lot. My own personal experience is that Financial Aid Night can be hazardous to your wealth.
Many parents assume that their child’s guidance counselor will answer all of their concerns at the high school Financial Aid Night. Unfortunately, this seldom turns out to be true, for a couple reasons.
Most guidance counselors have little-to-no training in advanced financial aid strategies. They don’t feel comfortable talking about it, and frankly don’t feel it’s their responsibility.
Guidance counselors care about your kids. But they are overworked, and often they are too bogged down dealing with issues such as discipline, drinking/drugs, scheduling, etc., to help each and every individual parent apply for financial aid.
That’s why Financial Aid Nights focus primarily on how to fill out the forms.
They do not explain how to legally and ethically increase your eligibility for financial aid by doing income and asset planning. They also do not help you pick schools based on each school’s ability to give you a good financial aid package.
And lastly, they will not show you how to get the best possible financial aid package from each school.
In other words, you’re likely to leave Financial Aid Night frustrated – and possibly with as many (or more) questions than you had before you attended. The good news is, there are a number of ways to lower the college bill and reduce your out-of-pocket costs. I try to share some of them with you here in these blogs. And of course we can always sit down and look at your unique situation in person.
College costs on the rise at state colleges
April 20, 2012
Ian Welham reviews the latest numbers on the cost of public colleges and universities
Did you see this in the news recently?…
The non-profit College Board reported that tuition and fees at state colleges and
universities rose more than 8% last year.
To put the price increase into context, the 8.3% spike is more than twice the inflation rate of 3.6%. Meanwhile family earnings continue to fall across all income levels.
We’ve been monitoring and reporting on this for a while now. We knew tuition costs were going up, but I frankly didn’t expect the numbers to be this bad. The sluggish economy is causing a drain on state revenues and education is getting hit hard. According to the report, state funding per student has plunged 23% over the last decade.
That’s an eye-opener.
Given this environment, finding financial aid is more important than ever. It also may be wise to give extra consideration to private colleges and universities that may be in a position to provide more college aid.
We’ll keep an eye on this for you. And continue to find ways for families to reduce their out-of-pocket college costs.
Approximately two-thirds of undergraduates at public four-year colleges receive grant aid. The average grant-award last year was $6,539.
Borrowing by students and parents rose 2% from 2009-10 to 2010-11. Last fall, President Obama announced a plan that will allow borrowers to cap student loan payments at 10% of discretionary income.
For parents who make too much money to get college aid
April 18, 2012
Ian Welham suggests what to do if your income is too high to qualify for financial aid
Quick, what happened last October that happens only once every 823 years?
If you knew that October had 5 Sundays, 5 Mondays and 5 Saturdays, congratulations. That is the correct answer.
Do you know the last time that happened? You’ll have to go back to the 12th Century. How far back do you save your calendars?
Last year we experienced four unusual dates: 1/1/11, 1/11/11, 11/1/11 and 11/11/11. But that’s not the end of the magic. Take the last 2 digits of the year you were born and the age you were last year and the result will add up to 111 for everyone.
Some cultures consider numbers like this good fortune.
I’m not sure I believe that. I do, however, know one number that most parents do NOT consider good fortune. That’s the Expected Family Contribution (EFC) number. Your EFC is the minimum amount your family is expected to pay at any college.
Compared to the rest of the country, middle-class New Jersey families make higher incomes due to this area’s higher cost of living. As a result, we’re penalized with higher EFC’s and lower college aid awards.
If your EFC is too high for your liking, you might be interested in a two-part article I wrote for the NJ Society of Certified Public Accountants. It’s called 7 Tips to Lower College Costs If Your Income Is Too High to Receive Financial Aid. Part 1 is up at their MoneyMattersNJ.com website now.
Here’s the link if you’d like to read it:
http://www.moneymattersnj.com/story.cfm?sid=15530
How a special skill can get you into college
April 16, 2012
Ian Welham dispels one of the biggest myths about getting into college
Have you ever visited a college or university for an official visit? At most schools, the college admissions process goes like this:
Step 1: the Director of Admissions or Assistant Director of Admissions gives a speech
Step 2: some students and/or professors are brought in and they give a speech
Step 3: question & answer session
Step 4: one or more student guides are brought in and the visitors are assigned guides and off you go on the tour
I’ve certainly seen my share of colleges, and during the Q & A session there’s one question that always seems to be asked. Usually it’s a Mom (with her beet-red son or daughter cringing beside her) who raises her hand and inquires, “Is it better to get a ‘B’ in an Honors Course or an ‘A’ in a regular course?
Usually the Director of Admissions will start in with the answer and often the audience will finish the sentence… “It’s better to get an ‘A’ in an Honors course.”
One question that’s less frequently asked – and usually stumps the audience when it is – is this: Is it better to be a well-rounded student or to have a single special skill?
The myth is that colleges and universities seek well-rounded applicants. In reality, they seek well-rounded classes. Big difference. The fact is, you have a better chance of getting accepted if you have a unique or special skill that distinguishes you from other applicants. Think about it. There are hundreds of thousands of well-rounded kids out there. But there are very few kids who, for example, play the vibraphone in a jazz band at the Village Vanguard.
Consider this: Every incoming freshmen class is a mini community. What does a community need? It needs dancers and debaters, newspaper editors, long jumpers, tuba players, glee club members, etc., etc. In other words, people with special skills and talents — not a whole bunch of generalists.
If you have a special skill or talent, what’s the best way to communicate that to a prospective college? For starters, include it on your application; and also talk about it in your essay, personal statement, and if possible, during an interview. In addition, you can ask your coach/teacher/mentor to write one of your letters of recommendation.
Sometimes parents ask: Should we include newspaper articles or citations that highlight the talent? I suggest caution here. For one thing, admissions officers don’t have lots of time to read extra information beyond what’s requested. And even though Grandma Jones may think it’s a big deal to be mentioned in the local town paper, the college admissions officer probably doesn’t.
Are you about to pay too much for college? Here’s how to find out
April 6, 2012
Ian Welham on how to protect yourself from overpaying for college
It’s getting frightening. College students are now borrowing twice as much as they did 10 years ago. Total outstanding debt has doubled in just the last 5 years. The amount of student loans surpassed the $100 billion mark for the first time ever. Total outstanding loans will exceed $1 trillion this year.
Without any guidance, 90% of the families we meet are positioned to overpay for college.
If these numbers cause you concern, perhaps it’s time to take advantage of the complimentary College Savings Analysis we offer. Here’s how it works.
Most of the information I share in these Monday Musings is generic in nature. However, there is no such thing as generic people, and each family has their own concerns and unique challenges. So the savings analysis is our chance to review your situation together, and explore the best strategies so you can take control of the process.
To give you an idea of what to expect, here’s what’s going to happen when you come in. Firstly, I’m going to answer your questions. I understand that this is a very daunting process — all the aspects of college planning and understanding how to get your child into college. So we’re going to try and take the confusion out of it for you.
The second thing I’m going to do is estimate your EFC. That’s your Expected Family Contribution. That’s so you’ll know what colleges expect you to pay. There are generally two types of families who seek our help. One is families who can qualify for federal financial aid. For those folks, we’re going to show you step by step how to maximize your financial aid, so your kids can attend college at a fraction of the sticker price.
The second type of family we see are parents who may have the means to write a check for college out of their brokerage account — but don’t want to. They’ve worked hard to save money and would rather not drain their savings to fund college. They usually give me a challenge, something like this: “Ian, I’ve got three kids and I want them to go to a good college. But I also want to retire some day. So paying $800,000 to $1 million in college tuitions is something I want to avoid. Your job, Mr. Ian, is to help me pay as little as possible.” I happily demonstrate how we can help.
Regardless of what camp you’re in, we’re going to recommend the smartest steps you should consider moving forward. What you’ll get out of this is peace of mind — the peace of mind that comes from knowing what to do next. There’s no cost or obligation for the first meeting. I’m willing to invest in you first. And if we can’t help you, I’ll tell you, straight up.
If you’d like to take advantage of your free College Savings Analysis, shoot an email to Info@CompleteCollegePlanningSolutions.com or if you prefer, call my assistant at (973) 467-0101 to book an appointment.
How to attend a college fair
April 4, 2012
Ian Welham shares some tips on how to get the most from attending a college fair
College fairs are like Las Vegas: much of what you see is glitzy and artificial, but in a mostly fun way. And you’ll never see more perky people in one place. (I’m from England; we don’t do perky.)
That said, there is value in college fairs. How should one approach them to get the most benefit?
Most students approach college fairs like they’re attending a giant flea market. They go without a plan, and wander around aimlessly and randomly, stopping occasionally when someone or something catches their eye. Or when one of their friends sees someone or something that catches their eye.
Poor strategy. All this yields is more college brochures to add to the stack already piling up on the dining room table.
Now I’m not saying you have to take a prep course on “Acing the College Fair,” but it does help to do a teeny bit of preparation and arrive at the college fair with a game plan. Here are a few tips for students:
1.) Make a list of schools you want to see. This is a great time to check out any colleges you may be curious about because you have the added advantage of being able to converse with a live, generally knowledgeable (albeit perky) human being. You’ll also want to stop by the schools that are on your short list — even if you already know everything you need to know about them (for reasons I’ll get to in a minute).
2.) Don’t go with a group of friends because you will be stuck following their agenda, not yours. It used to drive me batty when my daughters would venture off to a college fair with a list of 3 or 4 schools we wanted to learn more about. A few hours later they’d return home, and the conversation often went like this:
Me: So, what did you learn about Vanderbilt?
Daughter: Don’t know. Didn’t stop at the booth.
Me: Why not?
Daughter: Didn’t have time.
Me: Would you mind grabbing a tuft of my hair and pulling it out to save me the trouble?
3.) Get seen. Most colleges keep track of how much interest you’ve shown in the school. A college fair is another chance for you to score points. Also, it’s likely that the admission officer in charge of your high school will be the person at the table. Say hello. Remind them you’ve met them before. Make friends. Make yourself memorable. At the very least, make sure the college knows you were there. Fill out those response cards that you can’t imagine matter a wit. They do.
4.) Ask Questions. After all, isn’t that why you’re there? Some of my favorites:
- What type of student fits in best here?
- What makes an application really stand out to your admissions department?
- How might my interest in [ballet/debate/origami, etc.] influence admission to your
school?
- Do most students spend their free time on or off campus?
- Is it better to apply with a specific major or undecided?
- What is your graduation rate?
- What percentage of graduates finds work in their field within 6 months?
