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5 Best Practices For Completing The FAFSA

FAFSA-formStudent loan debt is now the second highest ranked consumer loan debt, next to mortgages, according to the New York Federal Reserve, with the amount of outstanding student loan debt exceeding $1 trillion in March of 2012.

Given this shocking number, it has become increasingly important to seek alternative or additional means of financing for a college education. Fortunately, financial aid is also available to students in the form of scholarships and grants. This is where the Free Application for Federal Student Aid (FAFSA) comes in. You need to complete and submit the FAFSA in order to be considered for financial aid such as the Pell Grant and various other scholarship programs. If any questions arise along the way, make sure to turn to a resource that can answer your important FAFSA questions.

While the FAFSA can be the key to receiving the financial aid you need, it is a lengthy form that requires a lot of detailed information, which makes it more likely you might fill something out incorrectly along the way. Unfortunately, one mistake could spell the difference between aid and no aid. Don’t allow your child to miss out on a valuable scholarship or grant because of a preventable error. Make sure to follow step-by-step instructions when filling out the FAFSA to avoid making a mistake.

Here are five important tips in completing the FAFSA:

  1. Plan your assets. A good type of asset to own when applying for financial aid is a retirement account such as an IRA or 401(k). These qualified retirement accounts, whether owned by you or by your child, are not counted at all in determining federal financial aid. Use caution, however, when withdrawing money from your IRA (or any retirement account) to pay for college. Though the tax law now allows penalty-free withdrawals from a traditional or Roth IRA to pay for qualified college costs, doing so could jeopardize financial aid in the following year. The entire withdrawal, principal and earnings, counts as income on the following year’s aid application.
  2. Move savings out of your child’s account. The idea here is that you really have to understand how the FAFSA formula works. The formula counts 2.6%-5.6% of a parent’s assets as being available to pay for college expenses and 20% of a student’s assets as an available financial resource. Basically, this means that assets belonging to the student result in a greater reduction in financial aid. By moving a child’s assets into an account that is not in their name, it will reduce the amount you have to report on the FAFSA.
  3. Submit your form early. Filling up the forms can be tedious but you shouldn’t put it off.  There are a lot of applicants seeking the same financial assistance as you. Therefore, it’s a good idea to submit your application as early as you can. If possible, submit before the deadline. This is not a good time to dally, because you might just lose out to the students who submitted ahead of you.
  4. Write a letter. Since the form itself is quite rigid, some families who experienced special circumstances can add a letter to talk about their situation (like the death of a parent or sudden job loss, for example). Back up the letter with proof and other documents to support it. A lot of colleges will consider what you have to say when deciding on your child’s financial aid package.
  5. Check and double check before submitting the form. It’s very easy to make a mistake when you’re filling out a complicated form. Have someone else check your form, too, in case you missed anything. It’s the easiest way to ensure that you got all the important details—and even the minor ones—correct.

Today’s guest article comes from the Student Financial Literacy team at iGrad.com.

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2 Responses to “5 Best Practices For Completing The FAFSA”

  1. I would also add, to make sure your in contact with the university about your Fafsa, I have seen several people not get information from the schools about needing certain documents and then they can’t figure out why their financial aid won’t go through.

  2. andrew says:

    So by using these tips, it will make it easier to get more financial aid? That sounds simple enough and everything was explained so well. We are filling out the FAFSA very soon and I will have to bookmark this post for reference.

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