Huntington Beach College

Now that we’re in the thick of FAFSA season, I wanted to answer somequestions on my collegeblog that I’ve been getting about financial aid forms. If you haveyour own questions, please leave them in the comment box below. Lynn O.

Try as I might I still can’t get my hands around the whole financial aidpicture.  We completed the FAFSA and CSS/Profile and were amazed to seethat the FAFSA family contribution amount was way more than we could actuallyafford! Does this mean that this is the lowest cost possible for schools with alarger price tag, merit scholarships included?

My son did apply to 2 private schools that use the institutionalmethodology, which I believe if admitted would give him the best financialpackages.  My husband makes a good salary, but we are not homeowners anddo not have much outside of our retirement plan.  Am I right aboutthis?  Lastly, my son did apply to 1 state school that we could affordwithout financial aid.  At this point, we’re waiting to hear back from allthe schools.

Lots of parents are surprised when they discover what their Expected FamilyContribution is. (If you don’t know what that term means, read myprevious post:

Experts have rightfully complained that the methodology used to generate EFCfigures for millions of families is flawed. A family’s EFC isn’t always goingto be fair. In fact, it’s quite likely that the EFC won’t pinpoint what afamily can truly afford for college. And it’s no wonder. Congress decideswhat’s in the EFC’s secret sauce.

The formula does play favorites. The methodology, for instance, favorshomeowners, aggressive retirement savers, small business owners, teenagers ofdivorce and rural Americans. That said, the biggest factor determining an EFCis usually the family’s income.

The FAFSA doesn’t ask if you own a home, which is great news for homeowners.Since you don’t own a home, this benefit won’t help you. The CSS/Financial AidPROFILE does, however, ask about home equity.

Your EFC indicates what you will have to pay, at a minimum, for one year ofcollege. Let’s say that you have an EFC of ,000 and the school costs ,000. Thatmeans you would not receive any need-based aid. Families with a high EFC,however, are eligible for merit scholarships from schools. For instance, theschool might award a teenager a ,000 merit scholarships, which would drop thecost from ,000 down to ,000. The vast majority of schools give meritscholarships to affluent students.

I have your book and enjoy your advice through that and othersources.  I wonder if you have any advice for someone who has very lowcurrent income but very high net worth. Our EFC is very high using the FAFSA(especially the Profile method) due to our taxable account balances and homeequity.  It is close to full cost of most colleges.

Are there any schools that would not consider our assets but onlyincome?

John

Most schools exclusively use the FAFSA and the FAFSA does not ask about homeequity of a primary home so that’s not an issue.

In addition,  if you have a lower adjusted gross income –  below,000 — you can qualify for something called the Simplified Needs Test,which doesn’t require that you disclose assets on the FAFSA. To be eligible forthe Simplified Needs Test, you can’t file the regular federal taxreturn.  You must also be able to file a 1040a or 1040EZ tax form.Sometimes with high valued assets, however, capital gains could require thatyou file a 1040.

At some FAFSA-only colleges, however,  if you qualify for thesimplified method, you will get federal aid (loans, work study and a Pellgrant) for some of your award package since your EFC will be low, but for theschool’s own institutional funds, (the good grant money that doesn’t have to berepaid), they look at the assets regardless of the simplified method.

While you might be able to avoid disclosing your assets on the FAFSA, youwouldn’t be able to do this on the PROFILE, which delves deeper into a family’sfinances. The PROFILE is used by 249 schools that are almost all private. Thefive state schools that use the PROFILE for undergrads are:

How about a post on the FASFAand financial aid for returning students?

Our daughter is in the middle of her first year at Oberlin, so we went through FAFSA and thewhole financial aid process last year. Your blog was a big help!  Now, weare filling out our FAFSA again and while we are more experienced, there aresome new wrinkles for a returning student. For example, our daughter received agenerous academic merit scholarship that is guaranteed for her four years (aslong as her grades are up). She is also doing federal work/study with a job oncampus.

There is a section of FAFSA which asks for the student’s financialinformation and has a couple of questions about work study and any scholarshipsreceived that “were reported to the IRS” or some such language. This worried usuntil we called the college fin aid department and they explained that we didnot need to fill in the scholarship received from the college itself, but wedid need to report our daughter’s earnings (only a bit over 1k) in the federalwork/study program.

Anyway, just an idea for you to consider.

Barry

Thanks for the idea Barry. All work-study earnings are taxable income andmust be reported as such. Students are supposed to report work-study earningsin the FAFSA’s Additional Financial Information section. The good newsis that work-study earnings are excluded when determining a student’s financialneed.

And just as Oberlin told you, institutional scholarships from the collegeshould not be reported on the financial aid form.

Time is running out to sign up for my next two college workshops at theUniversity of California, San Diego on Jan. 28 and Feb. 4. At the workshops —you can sign up for one or both – I aim to share with you ways to help you makesmart decisions about picking colleges and making them more affordable. You canlearn more here and sign up forthe workshops here.Lynn O’Shaughnessy

The College Solution