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.

 

 

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.

Good, as well as Alarming, Changes to Financial Aid Eligibility for the HS Classes of 2023 and beyond

 

Recent Changes have BIG Impacts for families with younger children!

At the very end of 2020, as part of the COVID 19 relief bill, a number of changes to the FAFSA form and the formula used to calculate need based financial aid eligibility were made. These will go into effect in 2022, when families start to file the FAFSA for the 2023/2024 school year. All current sophomores/10th grade students and younger will be affected.

Some of these are quite beneficial. The number of questions was cut from 108 to 40. A smaller amount of both parent and student income will be assessed as part of the family's resources to pay for college. The COA or cost of attendance for one year of college will be required to be posted on each college's website. That has not been the case so finding the total costs at most colleges has been quite difficult if not impossible.Veterans' education benefits and workers' compensation will no longer be counted as income.

Additionally, the elusive and confusing EFC (expected family contribution) will be renamed and called the Student Aid Index (SAI). Since the actual out of pocket cost of college is typically more than the EFC, changing this misleading name should help end that confusion. Unfortunately, because of the many factors each college considers when creating aid packages, the SAI will not give a family clarity about their expected out of pocket costs any more than the EFC did.

The portion of a student's income which will not be assessed will be increased to $9,410 for dependent students and $14,630 for independent students. This significant increase is designed to encourage students to work both during the school year as well as the summer and semester breaks. The qualification to be considered an independent student is also being slightly expanded to include students who are legitimately unable to contact a parent and/or those for whom contacting a parent would pose a risk.

Financial aid officers, starting with the 2023/2024 school year will be able to make adjustments related to costs incurred because of natural disasters, national emergencies, recession, economic downturn, and significant business losses. This should bring some extra assistance to families who need it. They are also going to be unable to have a policy of denying all aid appeals.

Unfortunately, not all the changes are good. At the moment, and until these changes take effect, the parent portion of a family's EFC is divided between the college student children in the family (parents in college aren't included). That means that a family with two kids in college would have the parent contribution split 50/50 between the two children. If the parent contribution is $20,000, $10,000 would be included for student one and $10,000 for student two. The student contribution of each student would make up the rest of their EFC. Once the changes are implemented in 2022, that will no longer happen. The parent portion will NOT be divided. In this example, it would look like this:

NOW: Parent contribution $20,000

Student 1's EFC = 1/2($20,000) + student 1's contribution (as calculated by the formula)

Student 2's EFC = 1/2($20,000) + student 2's contribution (as calculated by the formula)

AFTER October 1, 2022: Parent contribution $20,000

Student 1's EFC = $20,000 + student 1's contribution (as calculated by the formula)

Student 2's EFC = $20,000 + student 2's contribution (as calculated by the formula)

This means that the family's out of pocket costs will literally double and the eligibility for need based aid will not be increased, despite the fact that two of the children will be concurrently in college.

This is a HUGE problem that seriously adversely impacts families with multiple children in college. PLEASE reach out to your senators and representative and ASK FOR A CORRECTION! 

While you're at it, as that the APA, the Asset Protection Allowance be restored. In 2011, a two parent family with the older parent at age 50 would have had $48,800 of their assessed assets not considered in the EFC calculation. This allowance has been steadily decreasing. At the moment, this same couple only has a $7,000 allowance. 

Barring a legislative change, this change will make college financially out of reach for many families, forcing them to choose which of their children to send to college. Strategically, students will need to use AP and CLEP and dual enrollment strategies to lower their college costs and apply to colleges where they will receive massive scholarships. Students should also plan to work, since their income allowance was increased. Those three strategies, well applied, will help families make college educations possible for multiple children.

For more information on Katherine's College Success Program, please visit Celtic College Consultants' website. To schedule a consultation with Katherine to explore how to best implement her College Success Program strategies in your family, click here. Her 2015 - 2020 College Success Program graduates were offered, on average, over $235,000 each in merit scholarships and were accepted by multiple great fit colleges and universities.

Recent Changes to College Savings Plans

BACKGROUND INFORMATION

529 plans allow taxpayers to save larger amounts of money than other tax-advantaged education savings plans do.  They are limited only by the contributor’s gift tax concerns and the contribution limits of the intended plan.  There are no limits on the number of contributors and there are not income or age limitations.  The maximum amount that ca be contributed per beneficiary (the student) is based on the projected cost of college education and will vary by the plan of each state.  Most have limits in excess of $200,000 while others are over $370,000.  Generally additional contributions cannot be made once the account’s balance reaches your state’s maximum level, but that doesn’t prevent the account from continuing to grow.

Although the plans are authorized by the various states, it’s not required that the plan be set up in the future collegian’s home state.  Additionally, the student is not restricted to using the funds in either his or her home state or the state where the plan was set up.  Some states, however, do provide state income tax deductions as an incentive to get their residents to set up plans in the state.  These incentives typically come as a state income tax deduction or a tax credit for the contributions to the state’s 529 plan.

When the times comes for college, the distributions will partially be earnings in value and partially from contributions.  The contributions are never taxable.  The earnings part is tax free if they are used to pay for qualified education expenses like tuition, fees, and books.  In addition to the tax-free distribution from the 529 plan, the taxpayer may claim and education credit such as the American Opportunity tax credit, which can be as much as $2,500 ($1,000 of which is refundable!). 

The big advantage of s section 529 plan is the tax-free accumulation of funds so it is best to establish and fund one as early as possible in the child’s life.  There is a special provision that allows those concerned with the annual gift tax limit (currently $15,000) to contribute five years’ worth ($75,000) up front.  This limit is per contributor.  If there are multiple contributors (parents, grandparents, godparents, aunts, uncles, etc., huge amounts can be contributed up front and provide considerable long-term growth.

Keep in mind, however, that saving through a 529 owned by the parents means that you are accumulating your college savings in a vehicle that is considered an asset and will be factored into need based financial eligibility calculations by the FAFSA processor. It will also be considered, as long as the student is the beneficiary, no matter who the owner is, by the schools utilizing the CSS PROFILE financial aid application form.

TAX REFORM CHANGES of 2018

As of 2018, tax free distributions of up to $10,000 per year per beneficiary are allowed for tuition for elementary or secondary schools.  Of course, using the funds for K-12 education  leaves less for college education.  This will especially impact those families not able to front load the 529s since the monies won’t be able to grow over the years.  This is a change to federal law; please check with your tax preparer regarding limitations your state may still have.  Some still restrict 529 distributions to use for college expenses.

The tax reform also allows the distribution from a 529 to be tax and penalty free if it is rolled over to an ABLE account for the same beneficiary (or a member of his/her family) within 60 days of its distribution.  This rollover provision is only available until 2025.  The rollover amount is limited, when combined to other contributions, to the annual maximum.

In case you’re not familiar with them, qualified ABLE programs provide the means for people to save in order to support individuals who became blind or severely disabled before their 26^th birthday.  This support is to maintain their health, independence, and quality of life. 

Please contact your tax preparer for additional information.

Should You Homeschool High School? Part 4: A Look at Financial Aid Basics

By Katherine O'Brien, MA CCPS

Founder, Celtic College Consultants

Author, Every Catholic’s Guide to College: The Best US Colleges & Universities for Practicing Catholics, 2018 & 2019, and The Ultimate Guide to Top Quality College Planning, all available through Amazon.com

Photo by Pepi Stojanovski on unsplash.com

Financial Aid, Scholarships

First things first.  Your child WILL be eligible for federal financial aid, even if s/he earns a non-accredited diploma.  S/He’ll need to file the FAFSA (Free Application for Federal Student Aid) each year, just like all other students.

Financial Aid & Scholarships Basics

Financial aid and scholarships MUST be applied for.  There are a number of means to do so: financial aid applications, scholarship applications, etc.  Sometimes the student’s application for admissions is also used to determine his or her eligibility for various scholarship programs the school offers.  Sometimes a separate application, or series of applications and/or interviews will be required.

IT IS IMPERATIVE THAT EACH COLLEGE’S FINANCIAL AID AND SCHOLARSHIP WEBSITE BE CAREFULLY REVIEWED.  The particular opportunities, requirements, and deadlines at that institution will be posted.  Some schools have a central scholarships page, sometimes with their own search function, while others have information scattered around.  Scholarships can be given by the university, the college within the university, and/or the academic and athletic departments.

Need Based Aid – is comprised of tuition reductions, grants, and loans which are qualified for on the basis of “need.”  In common parlance, anyone whose budget comes up short would be thought to be in need.  In the realm of financial aid, there are formuli used to determine need, also known as demonstrated need.  Forms must be completed and submitted by deadlines set by the schools.  For federal student aid, the FAFSA form (fafsa.ed.gov) is the form which qualifies all citizens and legal aliens for federal student aid programs ranging from Pell grants to federal student and parent loan programs.  Colleges award need based federal aid before they award any other aid.  There are a couple of colleges in the country who have opted out of the federal student aid programs.  These schools have their own financial aid programs. 

Colleges can also provide need based aid to students.  Many use the FAFSA formula as their guide.  Some colleges and universities also require the CSS PROFILE (profileonline.collegeboard.org) form and/or their own forms.  A few colleges require their own forms.

EFC/Expected Family Contribution – is the official amount of money the FAFSA or PROFILE processor determines, based on their formula, that the student and his or her family can pay for one year of college.  There are five factors that contribute to the EFC:

1.    Parent income (for the calendar year before the year in which the student is applying; for the 2020/2021 school year, 2018 income information will be used.) is based on the Adjusted Gross Income (bottom line on your 1040) of the parents.  In the case of divorce, the parent is the one with whom the student lives more than half of the time or the parent who provides more than half of the financial support. (50.1%)  If the parent is re-married, s/he will report the income of both him/herself and his/her spouse.

2.    Parent assets (current at the time of the form filing) including all portfolio assets with the exception of the family residence, retirement savings, life insurance, and/or annuities.  Businesses are valued at zero if there are fewer than 100 employees.  See PROFILE instructions for their alternate rules.

3.    Student income (for the same calendar year as the parents.  For example, for a student graduating in June 2019, starting college during the 2019/2020 school year (fall – summer), 2017 income information will be used.

4.    Student assets, current at the time of the initial FAFSA filing.  The same assets are reported for the student as were for the parents.

5.    Resources include all outside resources, be they money from grandparents or private scholarships. 

Grants – are monies given to students based on need.  They can be federal money, like Pell or SEOG grants, or they can be money from the state, like the CalGrant program in California, or from the college itself.  Grants do not need to be repaid.  

Scholarships – are monies given to students based on merit of some kind.  There are two main categories of scholarships, from a financial aid eligibility perspective.  Institutional scholarships comprise 93% of all scholarship dollars.  These funds come directly from the colleges themselves.  Private Scholarships are those offered by other organizations like the Knights of Columbus, Nordstrom, etc.  Private scholarships are considered resources by the financial aid formuli.  They reduce a student’s eligibility for need based aid dollar for dollar.

Some scholarships have a need component.  This means that the scholarship awarding agency takes into account both merit qualifications and the student’s financial need. 

Some scholarship money may be taxed.  Money used for purposes other than tuition and fees is considered taxable income to the student.  Check with your tax preparer for particular information for your situation.

Gap – is the difference between your demonstrated need and the amount of financial aid offered.  Most schools “gap” students; they do not meet the full demonstrated need.

Other Aid – Some schools participate in collectives through which they offer tuition discounts to students who live in certain other states.  The Western Undergraduate Exchange & the Midwest Student Exchange Program are two examples.  These tuition reductions are not need based and are only merited by virtue of the student’s state of residence.  Not every public school in states that participate in an exchange offers the program.  Some limit the program to include or exclude certain majors.  Details are found on each regional exchange’s website.

Net Price Calculator – By federal law, every college and university is required to have a net price calculator on its website.  Sadly, many tuck them away and make them difficult to find.  It is often easier to simply use the school’s search function to find it.  In order to get an accurate estimation, the calculator will need to ask about the student’s GPA and test scores.  The less information requested, the less reliable the estimate will be.  Sadly, they are not required to provide a calculator that gives an accurate estimate of inquiring student’s likely out of pocket costs.

Katherine O’Brien, MA CCPS is a Catholic homeschooling mother of six who has homeschooled since 1998.  She is the founder of Celtic College Consultants and has served college bound teens all across the US since 2004.  Students in her 2015 -2018 classes were offered over $237,000 each, on average, in merit scholarships. In 2017, Katherine compiled and released Every Catholic’s Guide to College: The 315 Best US Colleges & Universities for Practicing Catholics, 2018.  It is available on Amazon.com.  Kolbe Academy families are eligible for 10% off of all of her services and $100 off her initial consultation fee.