Perhaps the #1 most-frequently-asked question about the CSS/PROFILE is “How am I supposed to answer question 160A?” (“Enter the amount your parents think they will be able to pay for your 2017-18 college expenses.”) It’s a trap, right? A higher-stakes version of the “name your price” offers musicians put out there for concerts and downloads. Answer too high and you might be giving up aid; answer too low and your student might Continue reading CSS/PROFILE Question SR 160A
As many as 1/3 of college students don’t complete the FAFSA. There are a variety of reasons why not, ranging from fears about its complexity to the assumption that it’s not worth the time because the family is not eligible for aid and hundreds if not thousands of other reasons. The end result is that a lot of money is left on the table and many families Continue reading Why file the FAFSA
Once you’ve finished the income section of the FAFSA, you’re on the home stretch. What’s left? Assets. And once again, the form is deceptively simple: “As of today, what is the net worth of your parents’ investments, including real estate (not your parents’ home)?”
OK, so not the home. But what does count? Continue reading How to Fill out the FAFSA 3: Assets
Many people call themselves “financial advisors” when they should in fact be called sales people. A number of these types are active right now telling parents of high school juniors and seniors that they should buy annuities or life insurance to help themselves in the financial aid process. This “investment” is not as helpful as you might think. Continue reading Life Insurance and Annuities
Last week I appeared in an article in the New York Times’ personal finance section about whether saving for college is advantageous or disadvantageous with respect to receiving financial aid. Many people believe that college savings result in lower financial aid awards; it’s a logical assumption since Continue reading To Save or Not to Save
This week, President Obama signed an executive order that will dramatically simplify the financial aid process for many families. Beginning next October, for the 2017-2018 school year, families will be able to file the FAFSA using two years’ prior (“prior-prior year”) data. That means that Continue reading 2015: The Biggest Year Ever for the FAFSA
Are you the parent of a high school junior? If so, 2014 is your “base year” for financial aid purposes. What does that mean? It means that your initial financial aid applications—FAFSA and/or CSS PROFILE—will be based on your income and assets for 2014. Now is a good time to make plans or adjustments that will help you in aid calculations.
As I’ve said before, income is a bigger factor than assets in the formulas. In both aid formulas, the three biggest allowances against income are your family size, how many dependents you have in college, and how much you pay in taxes.
At this point, it’s likely that how much you pay in taxes is the area where you can do the most. And paying more federal taxes is better in the formulas than paying less. (The formula counts actual federal taxes paid, but uses a formula for state tax allowances.) Of course, you don’t want to cut off your nose to spite your face: you want to find opportunities to shift your tax burden into this year with a corresponding decrease in taxes in a subsequent year. One way to do that is to contribute to a Roth IRA rather than your 401(k), or if your employer’s 401(k) plan has a Roth option, use it for some or all of your contributions. You’ll pay taxes on that money now, which will reduce your available income in the formulas, but you’ll have tax-free withdrawals in the future.
Self-employed people have a variety of options for managing their income in the base year. I’ll talk about those in a future post.
Since it’s college acceptance season, there are a lot of great articles out there about evaluating offers. Apologies for offering less original content here but reinventing the wheel doesn’t help. Here is a great article from the New York Times that will help you be a more informed consumer of your various offers.
(Is that alliteration or what?)
Did you get an aid award that’s not what you’re hoping for? Recently the New York Times wrote about appealing financial aid awards. For the article, Ron Lieber sent a questionnaire to aid officers at some of the priciest private schools asking about their appeals process. Occidental College’s completed questionnaire is extremely helpful for understanding how and why a college might grant an appeal, and it’s available here.
Some highlights that are probably relevant to the appeals– or application– process at any school:
- Private colleges using institutional funds have more latitude to make changes than do public schools using federal funds.
- Your appeal should discuss why you can’t afford to send your student to the school, not why your student wants to attend the school. If they’ve already been admitted, the school already likes them.
- Families with the means to do so need to save for college. It’s a big expense and one that you can plan for because you know college is expensive and you know when you will incur the cost. Your current economic hardship is more understandable and sympathetic if you saved before the hardship came about.