The deadline for submitting the FASFA (Free Application for Federal Student Aid) to the UC and Cal State systems is March 2nd. Many private universities have similar deadlines. For those of you who are new to the financial aid maze, the FAFSA is the financial aid application used by colleges to determine eligibility for need based federal financial aid, i.e., grants, low interest loans, and work study. In California the FAFSA must be submitted for the student to be eligible for a Cal Grant and the new California Middle Class Scholarship. The Middle Class Scholarship is for undergraduate students from families with incomes up to $150,000 who attend a University of California or Cal State campus. Grants and scholarships do not have to be repaid. That’s free money for college, folks.
If you’re on the fence about applying because you believe your income is too high and/or you have too many assets here are a few general tips to keep in mind.
Tip #1 – Submit the FAFSA. It’s free. You cannot benefit if you stay on the sidelines. That’s not really a tip, but it’s good advice.
Tip #2 – Income and assets of the student are assessed at a higher rate in the FAFSA formula than parent income and assets. As a general rule save money in the parent’s name, unless it’s in 529K savings account with the student as the beneficiary and parent as custodian.
Tip #3 – When Something is Nothing – The FAFSA does not include home equity at all in its formula. Even if you have millions in equity in your primary residence the FAFSA will not count it. Do not include home equity when you answer the question about the net worth of your investments. Home equity = Zero on the FAFSA.
Tip #4 – When Something is Nothing – If you own or control more than 50% of a small business or farm that employs fewer than 100 employees do not include it when you answer the question about net worth of current business. Small business worth = Zero on the FAFSA.
Tip #5 – When Something is Nothing – Retirement assets are not used in the FAFSA need calculation. This includes 401K plans, pension funds, annuities, non-education IRAs, and Keogh Plans. Retirement assets = Zero on the FAFSA.
Tip #6 – If you are divorced or legally separated and your student does not live with you more than 50% of the time, then you do not report your income and assets on the FASFA. Only income and assets of the custodial parent are used in the FAFSA formula. This does not mean the parent with legal custody, or the parent who claims the child as a dependent on the tax return. Only the parent with whom the child lived more than the half time during the past year must report income and assets.
Tip #7 – Report Adjusted Gross Income. Do not report total income. If you estimate income in order to submit the FAFSA by the deadline, be sure not to overestimate your Adjusted Gross Income.
Tip #8 – File the FAFSA on time.
Tip #9 – Don’t leave answers blank. If the answer is zero or not applicable enter zero in the space.
Tip #10 – To learn more about other tips that may help you in the need based FAFSA formula call College Pathways at 866-769-4944, or see more about paying for college on the College Pathways website.