FAFSA FAQs

The FAFSA for the 2018-2019 school year is here. Here are some FAFSA FAQs:

Q: What does FAFSA mean by “income?” Gross, taxable, AGI? Something else?

A: All of it. FAFSA wants to know each parent’s gross income, including tax-deferred retirement plan contributions. The easiest way to take care of the income is to use the IRS Data Retrieval Tool (DRT) to directly transfer income information to the FAFSA. After you’ve transferred your data, you’ll still have to answer questions about nontaxable information: contributions to retirement plans, tax-exempt interest income, and more.

Q: What about divorced parents?

A: The custodial parent files; the noncustodial parent’s information does not need to be included. Several caveats here:

  • Generally it’s best for the lower-earning parent to file, regardless of who is named as the custodial parent in the divorce decree. However, the FAFSA deems the custodial parent to be the parent with whom the student spent the most time. Obviously this strategy doesn’t work if the lower earner doesn’t live anywhere near the high school the student attends.
  • Any child support or alimony paid by the noncustodial parent is reported on the FAFSA, which can cause the two exes’ incomes to be more equal.
  • Any money given by the noncustodial parent to the student– such as from a 529 account owned by the noncustodial parent– will be reported as student income.

Q: What’s the asset protection allowance?

A: It depends. It’s based on the age of the oldest parent and marital status. A married couple where the oldest parent is 50 gets an asset protection allowance of $22,300. A single, 50-year-old parent gets $13,500. For most married couples it’s between $20,000 and $30,000. For single parents it’s likely to be between $10,000 and $19,500. In all cases, lower if you’re younger; higher if you’re older.

Q: When do I need to complete it?

A: Check with your schools and state aid agency. Each has its own deadline; they are not necessarily consistent even within a state’s public education system. For example, here in Oregon, UofO has March 1 as its FAFSA deadline and OSU’s is Feb. 28. Be sure to check if your school or state has rolling or first-come, first-served aid. If that’s the case, then do it ASAP.

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