Who worries about filing tax returns in January? You should — if you or your child is going to college this fall. You'll need that income tax information to fill out the Free Application for Federal Student Aid (FAFSA). The time to fill out the FAFSA is now, or as soon as possible.
The FAFSA is the gateway to financial aid, Federal Pell Grants, scholarships, and federal and state student loans. Some colleges even require it for merit-based scholarships, and in Georgia, it will help you apply for the HOPE scholarship.
"With more students applying for financial aid than ever before, time is of the essence," said Tracy Ireland, vice president of the Georgia Student Finance Commission. "Families want to complete the FAFSA as soon after Jan. 1 as possible, because some schools and states have early priority deadlines [in February and March] for applying for financial aid."
If government forms fill you with fear, take heart.
“The form has actually gotten shorter and easier to fill out, and there’s plenty of free advice to help,” Ireland said.
Here are a dozen things to know before starting the process.
1. Never pay for financial aid information or advice on the Web, or for help to fill out the FAFSA, Ireland said. The application is free at the government website (www.fafsa.ed.gov).
2. Fill out the form online.
"You can print a paper form, but online has built-in edit checks. It will eliminate questions you don't need to answer and has other features that make the process simpler and better," said Mark Kantrowitz, publisher of www.FinAid.com, a free source of financial aid information, and www.FastWeb.com, a free scholarship matching service. "It's also much easier to amend an online FAFSA if you've made mistakes, and you and your chosen schools will get results much faster online."
3. Apply for aid, no matter what.
“The biggest mistake that people make is not applying or not applying every year,” Kantrowitz said. “Everyone should fill out the FAFSA, regardless of income. The formula changes frequently and the amount of aid can change based on your annual income, assets, number of children in college and other factors. There is no income cutoff. Families with six-figure incomes are getting aid, because they have several children in college, for instance.”
4. Complete your income taxes as early as possible. If you can’t, fill out the FAFSA by estimating your tax information based on W-2 forms, pay stubs, 1099-R forms and last year’s taxes.
5. If you estimate, you’ll have to amend your FAFSA with actual tax figures as soon as you have them.
6. Having actual tax figures allows you to use the IRS Data Retrieval Tool on the FAFSA website. You can also use this tool if you need to amend your FAFSA.
“This will retrieve the needed data from your tax returns, decreasing the possibility of transcription errors and reducing the likelihood of your form being selected for verification,” Kantrowitz said.
7. Schools ask families to verify about one-third of FAFSA forms, meaning that you’ll be requested to mail actual tax and other documents to the school.
“If you get a verification request, respond to it quickly,” Ireland said. Your financial aid package depends on it.
8. Assemble the necessary documents before you start.
You’ll need Social Security and driver’s license numbers; your latest tax returns; records of untaxed income; current bank, stock and investment statements; mortgage information; and any business or farm records. Also find and select the Title IV Institution Codes for each school to which you’ve applied.
9. The FAFSA assesses student and parents’ assets differently when determining financial aid eligibility.
Twenty percent of student assets count when the Expected Family Contribution (what you can pay toward college) is calculated, compared to only 5.64 percent of parents’ assets .
“You can increase your aid eligibility by spending down student savings before applying, or using all his money for college in the first year, so that the award will be greater in subsequent years,” Kantrowitz said.
10. Consumer debt doesn’t enter into the equation for the Expected Family Contribution, but savings do.
“For financial aid purposes, it’s better to use savings to pay off credit card debt,” Kantrowitz said.
11. Retirement accounts don’t factor into the FAFSA , so don’t include 401(k), IRA or other such funds among your assets. They hurt your chances for aid.
12. “Be thorough and honest,” Ireland said. “When in doubt, ask for help at 800-433-3243 or by using FAFSA on the Web Customer Service Live Help.”
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