Category Archives: Financial Aid

Special Circumstances

CSS PROFILE, FAFSA, Financial Aid, Need-based Aid

Special circumstances refers to anything in the applicant’s financial situation that is not reflected on the FAFSA or CSS Profile. The Profile has an actual space for applicants to detail special circumstances. For FAFSA schools, applicants may have to appeal their aid award and go through the Professional Judgment (PJ) process. If this might apply to you, you should understand the decision-making criteria and process so that special circumstances you’re detailing are in fact special circumstances in the financial aid world.

The Higher Education Act and its various reauthorizations list some examples of special circumstances: “elementary or secondary school tuition, medical or dental or nursing home expenses not covered by insurance, unusually high child care costs, being homeless or a dislocated worker, recent unemployment of a family member, or other changes in the family’s income or assets.” However, there is a “judgment” element of PJ: “Use of professional judgment is neither limited to nor required for the situations mentioned.” As the FAFSA transitioned to using prior-prior income data, the Department of Education gave guidance to financial aid administrators to expect more PJ cases.

While there is some judgment involved, there are also a number of requirements for PJ:

  • The reason for the adjustment must be documented, and must apply only to the student and not to a class of students. For example, in the case of a job loss, the family would need to provide documentation such as a termination letter.
  • Adjustments can only be made to either the cost of attendance or values of data inputs into the EFC formula, not to the formula calculation itself. In the case of a family illness, for example, the administrator might reduce assumed income from the ill person or reduce assets based on projected medical expenses.
  • Students may not be deemed independent for aid purposes based on parents’ refusal to provide financial support for education or to complete the FAFSA. However, such students may be eligible to borrow larger amounts under federal loan programs.
  • Calculations may not be adjusted based on recurring vacation, tithing or other standard living expenses.

Financial aid administrators are required not only to document any adjustments they make, but to resolve any conflicting information that they receive. So the onus will be on you to document your situation. And remember that since we’re talking about the FAFSA and Profile, all of this refers to need-based awards, not merit.

FAFSA for Divorced Parents

CSS PROFILE, Divorce, FAFSA, Financial Aid, Need-based Aid, Student Loans

This is a big topic so for today I’m going to focus on general rules. Keep in mind the FAFSA rules are different from the CSS Profile rules; below is FAFSA only.

The custodial parent for the FAFSA can be different than the custodial parent in the divorce decree and/or different from who claims the student as a dependent on their tax return. The FAFSA defines the custodial parent as “The parent that you lived with most Continue reading FAFSA for Divorced Parents →

529s and the FAFSA

529 Plans, FAFSA, Financial Aid, Need-based Aid

529s are a source of a bit of confusion when it comes to filling out the FAFSA. Here are some common issues:

529s for multiple children: All of the parents’ 529s get reported on the FAFSA as parent assets. Let’s say you have 3 children, ages 17 (the one whose FAFSA you’re completing), 15, and 12, and you have a 529 account for each with balances of $12,000, $10,000 and $7,000. You would report $29,000 in 529 assets. Continue reading 529s and the FAFSA →

Long Term Student Loan Default Rates

Financial Aid, Need-based Aid, Student Loans

Schools are required to publish a Cohort Default Rate (CDR), a useful but limited statistic showing the default rate of student loan borrowers from that school. Why is it limited? Because data is limited to federal loan programs and to students within three years of graduation. That tends to omit two groups of students with a higher-than-average likelihood of defaulting: students who are in forbearance programs– not making any payments due to financial hardship– and private loan borrowers. Fortunately, TICAS provides a broader look at student debt. Continue reading Long Term Student Loan Default Rates →

UTMA to 529 Conversions

529 Plans, FAFSA, Financial Aid, Need-based Aid

529s really started to gain popularity after 2001, when qualified distributions became tax-free. Up until then, UTMA accounts were a more popular option to save on behalf of a child, and they have remained widely used. However, as financial aid calculations and rules have become more codified, the UTMA has become far less beneficial as a college savings tool. That’s because an UTMA is treated as a student asset, meaning it gets no Continue reading UTMA to 529 Conversions →

FAFSA Asset Do’s and Don’t’s

529 Plans, Cost saving strategies, FAFSA, Financial Aid, Need-based Aid

It’s the busy season for insurance and annuities hucksters who tell parents of college-bound students that spending their assets to buy an insurance policy will yield all manner of financial aid benefits. Before you start making expensive moves that end up costing more in the long run, you should figure out what will really benefit you. Continue reading FAFSA Asset Do’s and Don’t’s →

FAFSA Basics

FAFSA, Financial Aid, Need-based Aid

This is a quick refresher on how the FAFSA works. The most important part of how it works is this: The FAFSA calculates your Expected Family Contribution. It is not the tooth fairy. The schools to which you apply use your EFC to determine your aid package. The FAFSA does not obligate them to meet your need; however, for purposes of Title IV funds (federal student aid), it does obligate schools to use standard criteria in packaging aid awards. The second most important part is this: much like preparing your taxes, you Continue reading FAFSA Basics →