Jan. 23, 2005
Original URL: http://www.dailystar.com/dailystar/business/57805.php
It's time for the college-bound to tackle what
could be the most economically rewarding test of
their lives: financial aid forms.
These forms test just how well students and
their parents can follow directions. Errors can
cost students a bundle of the $122 billion in
work-study awards, grants and low-cost loans
that are given out each year to about 14 million
students, experts say. And timing is important
"Not getting the financial aid forms done fast
enough is a big mistake because so many colleges
distribute aid on a first-come, first-served
basis or only provide aid to those who meet the
priority aid deadlines," said Ben Kaplan,
founder of ScholarshipCoach.com, a Web site that
provides financial aid tips.
Aid is given out by many sources: schools, state
and federal governments, and private donors.
Although students can apply for federal aid
until the end of the academic year, most state
aid, school and private donor scholarships are
awarded shortly after so-called priority
These priority deadlines are set by the colleges
and the awarding agencies, so they vary based on
the school, the student's state of residence and
the scholarship. Students are advised to find
the earliest of their deadlines and make a point
of submitting all the forms before that date.
Some of these deadlines are in early February,
so aid experts suggest that parents and students
get cracking on the financial aid forms that
became available this month.
"There are 14 million students applying for
financial aid each year. You want to put
yourself at the head of that line," said Martha
Holler, a spokeswoman for student lender Sallie
Mae in Reston, Va.
It's also worth noting that although high school
juniors do not yet need to fill out aid forms,
they should be getting familiar with financial
aid rules. The reason, Kaplan said, is that 2005
will be their "base year" for aid. The income
the student and the parents earn this year will
have a big effect on how much aid the student
can qualify for in 2006.
Many four-year universities set aside aid money
for continuing students based on the amount of
aid these students received in their freshman
year, so that base year can affect aid for the
students' entire college careers, added Kaplan,
who personally won $90,000 in college
Aid is typically based on financial need, so
earning less can mean more in loans and
scholarships. But it's foolish to try to earn
less in a base aid year - having more money is
always better than having less, regardless of
the effect on aid, Kaplan said.
Here are a few tips on getting aid.
Get the forms:
Every college-bound high school senior
and others planning to start college next year
should fill out the Free Application for Federal
Student Aid, better known as the FAFSA. It can
be completed on-line at www. fafsa.ed.gov.
Filling the form out online saves about 10 days
in processing time, which can help students make
early aid deadlines. The online application also
helps students avoid careless errors that can
delay applications, Holler of Sallie Mae said.
For instance, it will not allow students to skip
Many private colleges will require a second form
called the CSS Profile, said Joseph Russo,
director of student financial services at the
University of Notre Dame. The best bet is to
contact all target schools to determine what's
required and where to get the form. Be sure to
do it promptly, Russo said. Notre Dame's
priority aid deadline is Feb. 15.
Gather your documents:
The FAFSA and the Profile require
information about the student's and the parents'
income and assets. In many cases, the forms ask
for income data straight off 2004 tax forms.
Those who do not have their tax returns
completed can estimate, Holler said. But they
will have to revise their applications later in
the year to fill in the accurate figures. In
addition, parents should gather bank and
investment statements as well as trust account
Avoid common traps:
● The FAFSA will ask students and
parents to fill in their net worth. However, the
FAFSA definition of net worth excludes a lot of
assets that most people would otherwise include.
Do not include any assets held in qualified
retirement plans - that's 401(k)s, IRAs,
403(b)s, 457 plans and ESOPs. Also exclude home
equity, any cash value built up in an insurance
policy, and cash held in checking and savings
accounts. If a family included $100,000 in home
equity and retirement assets, it would
needlessly cost the student about $5,600 in aid.
● The FAFSA also asks for income information
from both parents. However, if the student's
parents are divorced, he or she may exclude
information about the noncustodial parent.
● Assets held in 529 college savings plans also
can trip up those filling out the FAFSA. That's
because each beneficiary of a 529 savings plan
probably has a separate account listed under his
or her Social Security number. However,
technically the asset belongs to the donor, not
the beneficiary. And those who record 529 assets
as the beneficiary's property probably will lose
out. Why? Every dollar held in the student's
name will cost that individual 35 cents in aid
eligibility. But a dollar held in the parent's
name costs just 5.65 cents in aid eligibility.
If Mom and Dad set up the account, make sure the
529 assets are shown as theirs on the FAFSA.
● Applicants may be tempted to skip questions
that aren't mandatory, such as how many students
the family has in college or in its household,
but these questions can boost the child's
eligibility for aid, Holler said.
● Kathy Kristof is the author of
"Investing 101" (Bloomberg, 2000) and
"Taming the Tuition Tiger: Getting the Money
to Graduate" (Bloomberg, 2003). Contact her
by e-mail at
email@example.com or by mail at
Kathy Kristof, c/o The Los Angeles Times,
202 W. 1st St., Los Angeles, CA 90012.