All posts by CollegeFinancialLady

FAFSA Verification

Every year, about 1/3 of FAFSAs filed are selected for validation, which could be described as FAFSA’s version of an audit. Some FAFSAs are chosen at random for verification, whereas some schools– especially those funding need-based aid out of an endowment– will verify every application. Because verification goes through the school, it’s not unusual for students to first learn about their verification status when they receive an acceptance and financial aid award. Being selected for verification does not typically mean that you’ve done anything wrong, just that you need to provide additional information.

If you are selected for verification, you’ll either see note on your SAR requesting additional documents, or you’ll be contacted by your school, or both. Because some documentation requires time to gather, it’s important to get on this right away if it applies to you. For example, you may be required to submit an IRS transcript of your tax return.

One big issue with verification is that it places a disproportionate burden on lower-income students, since about half of Pell Grant-eligible students will be selected for verification, and this burden has been shown to reduce college attendance– a recent study showed that more than 20% of these students do not complete the verification process, thus denying them access to the Pell Grant (and any other Title VI financial aid). At the same time, a study by the National Association of Student Financial Aid Administrators showed that verification wasn’t effective at rooting out cheaters and in fact served primarily as a deterrent to students: 84% of verified students overall had no change to their EFC or a change too insignificant to impact their Pell Grant award; among students attending two-year schools that increased to 91%.

What to do if you’re selected? Get on it, ASAP. Sometimes the schools simply request documents that you’ll have on hand, but often they want to see your tax return transcript. Here are the Department of Education’s instructions on verification, as well as more details on how IRS DRT and tax return transcripts are handled.

 

Waitlisted?

Students who are waitlisted at their top-choice school should understand how waitlists work, because they can a little bit like Lloyd in Dumb and Dumber: “So you’re telling me there’s a chance!”

Here is a great article explaining how waitlists work. The key takeaway from a money perspective: Waitlists tend to be “need-aware” so waitlisted students who require financial aid to attend should instead focus on the schools at which they’re already accepted. Remember that in addition to the likely lower aid package, you will have to pay a nonrefundable deposit– typically in the $500-$1000 range– at your backup school to retain your spot there since waitlisted students typically are not notified of their acceptance until after May 1. 

Coalition App

If you’ve never heard of the Coalition App, count yourself among the many. The Coalition App is similar to the Common App in many respects, including allowing students to create a single application for multiple colleges, but it has some key differences. First and foremost is that the Coalition Application was created by the Coalition for College Access, a group of 140+ (and growing) colleges that “is committed to making college a reality for all high school students through our set of free online college planning tools that helps Continue reading Coalition App

529 Withdrawals

529 withdrawals are always pro-rata contributions and earnings. That means that if you contributed $30,000 to your account over the years and it’s now worth $40,000, then your withdrawal will be 75% contributions and 25% earnings. That’s moot in the case of a qualified withdrawal, but it matters for a non-qualified one: tax and penalties will apply to the earnings portion. On the federal side, it’s taxed at the marginal rate of the person Continue reading 529 Withdrawals

Risks of Income-Based Repayment Plans

Income-based repayment, or IBR, can be a great option for recent college graduates who need some breathing room while getting started in a career. However, there are some real risks to it, especially for those who owe significant loan balances or are in career paths where the salary trajectory is fairly level. In these instances, the payments may never make enough of a dent on the loan principal to make a material difference in the balance, and the borrower could find themselves 20 years out with a large taxable loan forgiveness, despite paying substantial sums for 20 or 25 years. Continue reading Risks of Income-Based Repayment Plans

Finding Money

Of his two college choices, my son is leaning heavily towards the more expensive one. (Good news: it’s not as much more expensive as we had originally thought, but still around $4,000-$5,000 more for freshman year, including transportation– not exactly chump change.) We tasked him with finding some ways to bring his costs down and we’ve been pleasantly surprised with what he’s learned. Continue reading Finding Money

Athletics and Admissions

David Leonhardt at the New York Times points out that the enrollment scandal all over the news this week would not happen but for the outsize role that athletics plays in college admissions. To summarize: admissions decisions give preferential treatment to excellence in a variety of areas beyond academics– music, art, social service, research activity, athletics. They also boost admissions chances for other groups including low-income, underrepresented minority, and legacy students. However, by far the biggest admissions boost went to recruited athletes, who were “30 percentage points more likely to be admitted than a nonathlete with the same academic record.” Continue reading Athletics and Admissions