By Theresa Fry, Senior Vice President and Manager, IRAs, Retirement and Education PlanningPrint This Post
October brings a lot of things…cooler weather, falling leaves, pumpkin spice everything, and if you are the parent of a senior in high school planning on going to college next year, probably a little panic. That’s because it’s time to file the FAFSA. The Free Application for Federal Student Aid (or FAFSA) is the first step to uncovering if your student will qualify for federal financial aid, such as grants or loans and is what most colleges and universities require before they allocate their own financial aid.
Completing the FAFSA will take some time. Some parents report spending 3 – 4 hours working through the application. You can save time by making sure you and your student are prepared before you begin the online application process. Some of the information you will need to have on hand include student and parent bank and investment statements, W-2s or income statements, and 2018 income tax returns.
The FAFSA Application and Your EFC
If you are new to the FAFSA, both parents and students will need to have a FSA ID and password created and submitting the application will require electronic signature by both the student and parent (although you can also elect to print, sign and mail the application the old-fashioned way if you choose to do so). The FAFSA is considered the student’s application, not the parent’s, so any questions that refer to “you” or “your” are referring to the student. By working on the FAFSA together, you can minimize confusion and mistakes in the application process.
The FAFSA application is used to calculate an expected family contribution (or EFC). Financial need is determined by taking a school’s cost of attendance – which includes tuition, fees, books, supplies, room and board, and transportation expenses – and subtracting the EFC from it. The EFC is the magic number that most colleges and universities use when awarding financial aid. If your student has a list of potential schools they may want to attend, include them all in the FAFSA application now so you don’t have to go back in later and add a school or schools once your student is actively applying to a college or university.
The EFC is generally determined based on the assets and income of both the student and the parents. Student assets and income are factored more heavily than parental assets in the EFC. Keep in mind that custodial accounts, like UTMA and UGMA accounts, are considered assets of the student, not the parent/custodian.
Filing Early May Help Your Chances
FAFSA applications for the 2020-2021 academic year can be filed as early as October 1, 2019. Don’t put off applying too long. Many states and colleges have their own deadlines for admittance applications and financial aid. Financial aid is typically awarded by schools on a first-come, first-served basis, so it is beneficial to file your FAFSA as early as possible. There are many excellent resources available to you on the Federal Student Aid website and most schools provide financial aid counseling for both students and parents.
Understanding the process and getting your FAFSA application submitted early can help you be more successful in the financial aid process. With student loan debt easily reaching $35,000 or more by the time a student graduates and loan repayment plans lasting for 10 years, it’s important to develop a financial strategy for higher education costs. Regardless of where you are in your college planning journey, a Benjamin F. Edwards financial advisor has the tools and resources to help you.
Benjamin F. Edwards & Co. does not provide tax advice, therefore it is also important to consult with your tax professionals for additional guidance tailored to your specific situation.