Category Archives: Need-based Aid

What to Expect in the 2020-2021 FAFSA

FAFSA, Financial Aid, Need-based Aid

Last month– as it does every May– the Department of Education released its Needs Methodology for the coming FAFSA. The Higher Education Act of 1965 requires that the Income Protection Allowance, Adjusted Net Worth of a Business or Farm, the Education Savings and Asset Protection Allowance, and the Assessment Schedules and Rates be updated annually for inflation.

Three of the four items received modest increases. For example, the Income Protection Allowance for a family of four with two college students went from $25,400 to $26,080. Meanwhile, the dependent student Income Protection Allowance went from $6,660 to $6,840.

Once again, the outlier is the Asset Protection Allowance, which took another whack. Whereas last year’s formula gave a married couple with the oldest partner age 50 an Asset Protection Allowance of $12,500, this year that same couple would only get only a little more than half that amount, $6,300.

Why does this happen? Here’s an explanation of how the APA is calculated. Interestingly, the Higher Education Act requires that the Consumer Price Index be the inflation measure for every category other than the Asset Protection Allowance; in the case of the APA, it requires inflation to be calculated at 6%.

Here are some takeaways from all of this:

  • The typical family will see their EFC increase by about $350 based on the changes to the APA.
  • A student earning the average college student hourly pay of $13.32 could work a little over 500 hours without it impacting their EFC. While 500 hours may seem like a lot, a student who works 10 hours per week during the school year and 30 hours per week for two months of summer will work around 540 hours.

And one last reminder: If you haven’t yet completed the FAFSA for the 2019-2020 school year, you have until 11:59pm Central time on June 30 to do so.

Scholarships and Taxes

Financial Aid, Need-based Aid, Tax Credits and Deductions

Do you have to pay taxes on a scholarship? It depends what the scholarship is for. To understand taxes on scholarships, it’s worth remembering that the IRS defines qualified expenses differently for different purposes. Expenses get more or less the same treatment for taxability of scholarships as they do for education tax credits, so let’s review those. Continue reading Scholarships and Taxes →

FAFSA Verification

FAFSA, Financial Aid, Need-based Aid, Student Loans

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. Continue reading FAFSA Verification →

Waitlisted?

Application Process, Financial Aid, Merit-based Aid, Need-based Aid

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

Application Process, Need-based Aid

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 →

Planning for All Four (or More) Years

Application Process, Cost saving strategies, Financial Aid, Merit-based Aid, Need-based Aid, Student Loans

A friend whose son is my twins’ age was surprised recently when I told her some of the colleges my daughter was applying to. She thought they seemed unlikely choices given my constant messaging of finding affordable schools. Her son was interested in some of the same ones and the net prices they found were quite high. The answer: we have the benefit of two children in college all four years. That means our EFC gets divided between then and in many cases, this yielded lower likely net costs. Good news for my Continue reading Planning for All Four (or More) Years →

College Prep by Grade

529 Plans, Application Process, Cost saving strategies, CSS PROFILE, FAFSA, Financial Aid, Merit-based Aid, Need-based Aid, Student Loans

I gave a financial aid talk to college and career center volunteers at our high school recently. One question stood out: “This is a lot of information to absorb at once. Can you break it down into some specific suggestions by grade?” Two ideas are important here: College planning is a process that should start well before senior year, and there are things that can be done at any point to make things go more smoothly when the time comes to start applying. So here goes. Continue reading College Prep by Grade →