If you have a high school senior in the house, now’s the time for both student and parent to get serious about applying to college. Your kid is in charge of the school application, but parents need to take the lead in making sure your family is on top of the financial aid application process.
Here are four tips for helping your family navigate the financial aid process:
1. Treat the FAFSA application as the Holy Grail.
The Free Application for Federal Student Aid (FAFSA) is the ticket to all potential grants and loans. If you don’t complete this form, you are basically rendering your family ineligible for most financial aid. While the form says “federal”, it is also typically used to determine any state or private aid your family may qualify for. One of the biggest mistakes families make is to assume they shouldn’t bother with the FAFSA because they won’t qualify for any aid. In fact, all families regardless of financial need are eligible for an unsubsidized Federal Stafford loan. These loans start at $5,500 (this year) for freshman and rise to $7,500 for juniors and seniors. The interest rate is a fixed 6.8 percent. Yet if you don’t complete the FAFSA, your child can’t snag an unsubsidized Stafford.
There’s no sugarcoating the fact that the FAFSA is a bit of a pain to complete. It requires a fair amount of detail—including info from your federal tax return. Just remind yourself that the hours it may take to get it completed is the only way to give you and your child the ability to qualify for financial aid that can save you thousands, if not tens of thousands of dollars.
Important tip: The official deadline for completing the FAFSA application is June 30th of the year your child will be in school. (You apply for financial aid every year of school, not once.) Ignore that deadline and aim to get the application filed as soon after January 1st as possible. A lot of aid is parceled out on a first come, first serve basis. Wait until close to the deadline to get your application complete, and much if not all of the money may already be doled out. Learn more about FAFSA.
2. Don’t assume you won’t qualify.
If you already have one child in school and didn’t qualify for aid, don’t make the costly mistake that you won’t qualify this year. If there has been any change to your financial situation, that’s going to obviously change how the financial aid folks size up your situation. Moreover, if you will be juggling two children in school this year, that’s going to increase your odds that your older child may now qualify for aid (or more aid). Schools are indeed sensitive to the burden of having more than one child in school.
3. Focus on scholarships no later than the fall of senior year.
Now’s the time for your child to get serious about applying for scholarships. If you wait until the spring you’re shutting yourself out of plenty of potential scholarships with earlier deadlines. You and your kid can learn more about how to maximize their scholarship potential, and search potential scholarships at fastweb.com.
4. Keep money out of your kid’s name.
Your family’s eligibility is a function of the parents’ finances as well as any money in the student’s name as well. It’s crucial to understand that your assets and your child’s assets are treated differently. Retirement assets for a parent are not part of the calculation at all, and all other parental assets are factored in at a low 5.64 percent rate. But any money that is held in your child’s name—an UGMA or UTMA account for example-will be factored in at a rate of 20 percent. If you want to maximize your family’s eligibility for aid it’s best to spend down any assets in a child’s name before senior year of high school.
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