Paying for College: Financial Aid Forms - FAFSA & PROFILE

 by Katherine O'Brien, Certified College Planning Specialist

1.    FAFSA – the Free Application for Federal Student Aid

This form is the key that opens federal aid, including Pell grants (which have recently expanded to many more students!), SEOG grants, and federal student and parent loan programs. Many states also use the FAFSA to determine eligibility for their aid programs. Additionally, the vast majority of colleges use this form to allocate their need-based aid programs.

 

Who is your Parent for the FAFSA?

 

A key question – for the FAFSA, who is considered your parent when you are an unmarried undergraduate student

-If your biological or adoptive parents and you live together, whether they are married or not, then they are your FAFSA parents

-if you live with only one parent because the other is deceased, that parent (and his or her spouse) is/are your FAFSA parent(s)

-if your biological or adoptive parents do not live together, the parent who provides more of your financial support (and his or her spouse) is/are your parent(s) for the FAFSA

-If you don’t live with either of your parents and have not been adopted or set under a guardian, you still need to include the information for your parent(s) on your FAFSA.

 

Parent & Student must CREATE an FSA ID to electronically sign the form

 

You and ONE of your parents need to create FSA IDs. This is a code you will use to electronically sign your FAFSA form, as well as any federal loan forms. You can set one up here: https://studentaid.gov/fsa-id/create-account/launch

 

File the FAFSA online:

 

The FAFSA is available here: https://studentaid.gov/h/apply-for-aid/fafsa

File it in October of senior year for freshman year. It will need to be filed again annually in advance of each year of college. Be sure to CHOOSE the FAFSA form for the CORRECT SCHOOL YEAR – for a HS senior in the Class of 2025, choose 25/26 FAFSA, since that is your freshman year in college.

 

The FAFSA will pull tax information for both parent and student, for the calendar year two years before the school year starts. For the 25/26 school year, the 2023 tax information is used (2025-2=2023). Current asset information will be entered in by parents and the student.

 

Avoid Common FAFSA Mistakes

 

Say YES to Work/Study. It is program through which you can earn money toward your college costs.

 

File for the correct school year.

 

Only include the correct assets (see below)

 

Indicate your parents’ education level correctly. If neither parent has a bachelor’s degree, you are considered a first generation student and there’s more aid available. Be sure to indicate high school as their highest school completed.

 

List in-state public universities first in the college section. Search by college name, not abbreviations. Verify that you have listed the correct colleges. Unless you are sure you’ll be living at home or off campus, list on campus as your housing plan, even if you aren’t sure.

 

Be sure the student questions get student answers. When Mom sees “marital status?” she is thinking of her own, not the student’s, but the question is about the student’s marital status.

 

Look at the help (?) to determine the number of people in your household. While this number is no longer used in the federal formula, states and colleges get this information and can take it into account.

 

Watch your email after you file the FAFSA. The student will receive an email indicating the FAFSA has been filed. Also, if the student is required to “verify” their FAFSA, an email will let them know. So, KEEP AN EYE ON YOUR EMAIL. If you don’t check it regularly, set a reminder to check it every couple of weeks from when you file until the time you get financial aid awards. If a verification email comes in, deal with it right away.

 

The FAFSA MUST BE FILED for EVERY YEAR YOU ARE IN COLLEGE AND WANT AID.

 

What is an Asset for FAFSA?

 

Assets are your savings, investments, your liquid assets. NOT the house in which you live, car(s), or other possessions. NOT your retirement savings or life insurance. YES your second home, YES your stocks and bonds and 529 accounts (for the student), YES your business are assets.

 

What happens next??

 

Once you file the FAFSA form, and both parent and student have submitted it, the student will receive an email. If that doesn’t happen, the FAFSA didn’t get filed.

 

What is verification?

 

About 1/3 of FAFSA filers are selected for verification. If you are selected, you’ll need to do what is asked of you.

 

You’ll get your SAI, (formerly called the EFC), the Student Aid Index. It can be -1500 to 999,999. The lower the number, the more aid you are eligible to receive.

 

2. CSS PROFILE

 

About 250 colleges and universities require the CSS PROFILE form in addition to the FAFSA form. The PROFILE form is used to disperse the college's own funds. File the form in the fall of senior year. Full information and deadlines is available through each college's website.

 

The list of the colleges that require the PROFILE form is here. 

The PROFILE form requires significantly more information than the FAFSA. Income for two years before the college school year starts (just like the FAFSA, for 25/26 it would be the 2023 year), the year before the college year starts (for 25/26, it would be 2024, which might not be finished yet when the form is filed), and an estimate of the next year's income (2025).

Assets for the PROFILE form: Nothing is excluded. In addition to the many questions on the PROFILE form, some colleges include additional questions, which will be shown at the end of the form.

IDOC - the Institutional Documentation Service

IDOC is used by some of the PROFILE schools as the secure platform to upload various financial documents.

 

 

Paying for College, Part One: Scholarships

 by Katherine O'Brien, Certified College Planning Specialist

Confusing. Stressful. Complicated. That's how most people feel about the whole topic of paying for college.

Parents are afraid. Students are clueless, not having any concept of the meaning of money, of the real cost of anything.

 

Parents are afraid, unsure what is real – there is SO much conflicting and confusing information out there! In part, this is the case because the rules keep changing and there are variations from college to college and, even, alarmingly!, from year to year.

Scholarships Basics

Some Recent Stats

$46B scholarship dollars awarded in 2023, per the DOE. Scholarships and grants typically cover around 29% of college costs. Of that 46B, $8.2B was private scholarship dollars. Therefore 17% of scholarship dollars in 2023 were awarded by private organizations. The other 83% came from the colleges themselves.

 

Scholarships often enable students to afford a more expensive college than they could have attended without receiving the scholarships.

A greater percentage of scholarship recipients were attending very or moderately selective colleges than those who don’t receive scholarships (85% v. 75%). Students who enroll at very selective colleges are twice as likely to have won scholarships than  students at open admission colleges (17.7% v. 8.5%).[1]

 

Students with GPA over 3.5 is more likely to win scholarships. Also, students who file the FAFSA are more likely to have won scholarships than those who do not file the FAFSA (17% v. 9%). 85% of students who receive scholarships file the FAFSA v. 72% of students who do not receive scholarships. Also, students at private colleges are more likely to have won scholarships than those at public universities (19% v. 14%). Lastly, while more students majoring in STEM fields win scholarships than those with other majors, it’s not a significant difference (16.6% v. 14.6%)

 

About 1/7^th of students receiving scholarships receive them from private organizations. The total number of private scholarships has increased (20% from 2015/16 to 2019/20, per the National Postsecondary Student Aid Study). The total amount of private scholarships has also increased. The average private scholarship amount in 19/20 was just over $4,900 amongst students in bachelor’s degree programs.

 

Want a Full Ride?

 

Be aware that only 1.4% of undergrad receive gift aid covering their full cost of attendance (COA). Gift aid includes all types of grants and scholarships. 3% have enough gift aid to cover 90% of the COA.

Financial Aid impact

 

Simply speaking, this is how need based financial aid eligibility is determined:

 

COA – SAI – Resources = Need

 

Scholarships affect need based eligibility dollar for dollar. COA is the complete cost of attending a particular college for a particular year. It is an official number determined by the college. It might vary from major to major or college to college within a university, but not student to student. The COA includes tuition, fees, room, board, as well as a school determined amount for transportation, books, equipment, supplies, and miscellaneous expenses. SAI is the Student Aid Index, which is determined by the FAFSA (Free Application for Federal Student Aid) formula. The SAI is determinative for federal aid and most state aid; many colleges also use it to allocate their own need-based aid funds. Resources include monies paid by “outside sources.” This includes grandparents and other people as well as scholarships not directly granted by the college.

 

Because scholarships directly impact need-based aid eligibility, it is ESSENTIAL that you know whether you will be eligible for need based aid at colleges your child might attend. We’ll discuss this further in part two of this series.

 

Some scholarships are awarded for four years, while others are for one year only. Four year scholarships typically have requirements which must continue to be met in order to continue to receive them. Most important among these are the requirements of how many credits per term must be taken and the minimum GPA the student must achieve. Together these are called Satisfactory Academic Performance (SAP).

 

---

[1]  https://thecollegeinvestor.com/44670/odds-of-winning-a-scholarship-increasing

 

15 Huge Financial Aid & FAFSA Mistakes

by Katherine O'Brien (and Jeff Levy)

My colleague, Jeff Levy, shares some significant mistakes families make that can seriously affect their teen’s ability to maximize merit and financial aid.

 

Financial aid and FAFSA mistakes

1. Believing advice from people who aren’t qualified to give it.

I heard from a parent that an English teacher at his daughter’s school recommended “a little-known tip.” At their College Night, the teacher suggested that students select “not applying for financial aid” on their college application and wait until they’re admitted to submit the FAFSA.

This advice couldn’t be more incorrect, unethical, and potentially catastrophic to the family. If you expect to apply for financial aid, check “yes” on the college application and submit your forms well before the college deadlines.

[As a Certified College Planning Specialist, I have been trained in financial aid. I also regularly receive additional training.]

2. Deciding not to apply for financial aid because “we’ll never qualify.”

Most families have no idea whether they will qualify or not. Data consistently shows that many who are the most eligible for need-based aid never submit the FAFSA.

3. Not filing your income tax returns before applying for financial aid.

For current high school seniors enrolling in college in the fall of 2025, the FAFSA will not become available this year until December 1, 2024 because of widespread technical problems that began with last year’s release. Questions on the form will require accurate financial information from the 2023 tax year, and, in almost all cases, those tax returns will need to be provided. [They need to be submitted to the IRS AND processed before the FAFSA filing. During your FAFSA filing process, you will pull data both the parents' and the student's 2023 tax returns right into the FAFSA.]

4. Missing the college’s institutional deadline.

Some parents believe the best way to apply for financial aid is to wait until their student has been admitted. This is exactly what not to do. Be sure to submit your financial aid forms before each institution’s deadline. Keeping track of these can be annoying if your teen applies to many schools with Early Decision, Early Action, and Regular Decision deadlines. But it must be done. Going to each college’s website to gather and collate this information will take you or your child about 20 – 30 minutes.

5. Deciding not to apply for financial aid as a freshman and planning to ask for it later.

Many schools will give a full-pay applicant a bump in the admission process in exchange for the higher net revenue they bring to the institution. If such an applicant unexpectantly [sic] requests financial aid in later years, some schools will not consider that request for institutional aid; others might delay it by a full academic year. Do not make the mistake of “outsmarting” the admission office if there is even a [small] possibility you may require institutional aid in later years.

6. Not having a savings plan for college.

One of the most destructive myths about paying for college is that the financial aid formulas will wipe out your savings. People who advise this are either ill-informed or have a hidden agenda. In the needs calculation, the penalty for savings is five cents on the dollar! The best way to prepare for the cost of college is to save, and the best way to save is to use time to your advantage. Start early and save regularly, even a small amount each month.

7. Taking a work bonus in the FAFSA “base year.”

The most significant factor in determining what a family is expected to pay towards college is their Adjusted Gross Income on line 11 of Form 1040 of their federal tax returns.

Any income that can be postponed from the base year (2023 for students starting college in 2025, 2024 for students starting college in 2026, etc.) to the following year will decrease the applicant’s Student Aid Index (SAI) and increase their eligibility for financial aid.

8. Listing the 529 savings plan as a student asset instead of a parent asset.

Even though the student is the beneficiary of the 529 savings account and the parent the custodian, the Department of Education has stipulated that these savings plans should be listed as parent assets. This is an essential advantage because parent assets are “penalized” about one-quarter as much as student assets in the federal and institutional need methodologies.

9. Accumulating parent savings in a student-owned account.

While this can be a tax advantage, it is always a financial aid disadvantage. You must check with your tax advisor for the best approach. In the financial aid formulas, parent assets are penalized at about five cents on the dollar, while student assets are penalized about between 20 and 25 cents on the dollar. But check with your tax advisor about the best approach for you.

10. Allowing the grandparents to write the check directly to the college.

The FAFSA no longer asks the student if anyone other than their parents has given the student any money or paid any bills on the student’s behalf. So grandparent contributions to college costs is not a problem if the student plans to attend, or is already attending, an institution that only uses the FAFSA in the calculation of need-based aid.

However, any money paid on the student’s behalf from anyone other than parents is reportable on the CSS Profile, a second financial aid form used by about 170 undergraduate institutions. Such a payment or gift will be considered untaxed student income and could significantly reduce the student’s eligibility for need-based institutional aid.

11. When parents are separated or divorced, believing it’s the parent the student spends more time with who will complete the FAFSA.

Beginning with the 2024-2025 FAFSA [the FAFSA for the 24/25 school year], the divorced/separated biological parent who must complete the parent section of the FAFSA is the one who has provided more financial support to the student in the year to date.

12. Borrowing more than you can afford.

College is one of the most expensive purchases a family will make. Borrowing part of this cost to earn a college degree is not an unwise choice, just as borrowing part of the cost of a home can be an intelligent way to make home ownership possible. However, borrowing too much for college can be catastrophic.

Each family will need to decide for themselves how much debt is reasonable. A good rule of thumb is to keep total undergraduate loan debt below what the student expects to earn during their first year out of college. In other words, if students borrow the maximum lifetime limit of $31,000 in undergraduate federal student loans, they can successfully manage monthly repayments if their first job after college pays at least that amount annually before taxes.

13. Not taking advantage of low-interest federal student loans.

Federal student loans are generally packaged as part of the financial aid award. These are low-interest loans with many built-in repayment protections, usually far safer and less costly than private bank loans.

The federal cap on how much a student can borrow over four years of college is $27,000 (with annual caps from $5,500 to $7,500 per year) and the lifetime limit is $31,000. Repayments begin six months after graduation. I recommend taking advantage of this loan program if it helps your family meet the high cost of college.

14. “If she gets into _______, we’ll make it work!”

This thinking usually leads parents straight into the abyss of excessive borrowing. Parent loans (federal and private) have higher interest rates, fees, and stricter repayment terms than federal undergraduate student loans. Parents must think carefully about how many actual earning years they have left before going into substantial debt at an advanced age.

There are often less expensive options for college than high sticker price schools with little financial aid.

15. Not calling the financial aid office when you have a question.

These folks are not the IRS and not your enemy. They are usually happy to answer your questions and can be an excellent resource to help you navigate the complexities of the financial aid system. [Be careful. Sometimes a student worker is the one answering the phone. Be sure to speak with a trained financial aid officer when you call. Even so, remember that their primary job is to help the college meet its institutional financial goals.]

Financial and merit aid resources for students and parents

FAFSA (Free Application for Federal Student Aid)

CSSProfile

 

Link to original article:

https://grownandflown.com/fifteen-biggest-financial-aid-fafsa-mistakes/?

Financial Aid, Another shake up is on the horizon

 

by Katherine O'Brien, MA CCPS, founder of Celtic College Consultants

With some colleges costing more than $90,000 per year, more families need financial help than ever before. A few years ago, Congress passed a law which has been incrementally been implemented. The final major shift is due to be incorporated into the FAFSA for the 2024/2025 school year. Major changes are coming.

24/25 FAFSA will not be available until December 2023

Because the Department of Education had to completely re-write the processor, the FAFSA will NOT be available October 1, as in recent years. This is how it used to be. Until recent changes, professionals like myself used to work every New Year's Day filing FAFSA forms. This year we will likely see a reprise of that activity.

As of yet, schools with ED (Early Decision) application programs have not stated how they plan to handle this situation. ED applicants must sign a contract as part of their application. If they are accepted by their ED school, they agree to withdraw all other applications and attend their ED school. These schools typically require the CSS PROFILE form so can use that information to create an initial offer of financial aid for these students. Should your teen decide to apply ED, be sure to read all the fine print.

The EFC is being replaced by the SAI

The EFC (Expected Family Contribution) is the number calculated by the former FAFSA formula. Colleges could not award aid exceeding the difference between the COA (Cost of Attendance) and the EFC. The FAFSA formula has been significantly modified and, in some ways, simplified. The SAI (Student Aid Index) will replace the EFC. The SAI can be negative; the minimum EFC was $0. The lowest SAI is -$1,500.

Major changes have been made to the FAFSA Formula

1. The value of businesses and farms are now included. Previously, businesses with fewer than 100 employees were not included as an asset on the FAFSA. Moving forward, ALL businesses and farms will be included. Details about how to value a business have not yet been provided.

2. Non-taxed income will no longer be considered. This is a MAJOR change. Gifts from grandparents and others, child support payments will NOT be reported as income. Income is assessed between 25% and 47%. Child support payments received will now be considered as an asset and assessed at 5.65%.

3. There will be no asset questions for students eligible for free or reduced price lunch programs, whose parents' AGI is less than $60,000 AND their return includes no lettered schedules, and for students whose parents' AGI is less than $60,000 and their only lettered schedule is schedule C and it shows a gain or loss of less than $10,000.

4. Family size will depend on income tax dependents. If your situation is different, or not accurately reflected by the number of dependents on your return, you will need to notify the financial aid office(s) and ask them to take it into consideration.

5. The number of students in college is no longer considered by the formula. However, several other changes to the formula have been made. Experts in this area have been running test cases and have determined that the SAI is not much different for families with two in college. There are, however, significant differences for those families with three or more college students. If this is your situation, do notify the financial aid offices for all of your student children and ask them to consider that fact in your situation. THIS CAN BE CONFUSING; the question about the number of students in college remains on the form, despite it no longer being part of the formula. Please note that the inclusion of this information on the FAFSA form enables colleges to use this information in their process of allocating their institutional funds. The FAFSA formula/SAI is only required for the distribution of federal funds (Pell, SEOG grants, federal loans, etc.)

6. The housing choice question has been removed from the FAFSA. This is odd; colleges do need this information. Expect to see it on the application for admission and/or other forms required by the colleges.

7. The new FAFSA includes optional questions on race and sex. These are for statistical purposes only and will NOT be sent to the colleges. This information will only go to the Department of Education.

8. For students whose parents are divorced, the determination of who their parent is, for inclusion on the FAFSA, has changed slightly. Previously it was the parent with whom the child resided most of the time. It is now the parent who provides the most financial support for the student. If that parent is married, both the parent and his or her spouse's income will be considered, while the other parent (and his or her spouse, if applicable) income will not be reported nor considered. Be aware that most of the colleges using the CSS PROFILE form do require the "non-custodial" parent to also provide income and asset information. 

Keep in mind that the PROFILE form is a completely separate form and process. The PROFILE information is used by colleges to allocate their own institutional aid.

9. Verification will not be randomly selected. Over subsequent years, as the Department of Education (DOE) accumulates data, it is likely that those with certain situations will be more likely to be verified (audited). As more data is gathered, the DOE identifies the situations most likely to be erroneously reported on the form.

10. Pell grant qualification is going to change. Many families currently receiving Pell grants, including some receiving full Pell grants, will no longer be eligible. This is particularly true for farmers and business owners. At the same time, it is expected that many more families (about 2/3 of FAFSA filers) will be eligible for Pell grants. There is significant discussion between financial aid officers regarding how to make up the shortfall in funding dollars for these newly qualifying students. It is considered likely that a number of colleges will not be able to bridge this gap, making college unaffordable for even more students.

There are more changes. These are the most significant of them, and the ones that will impact more families.