Daily Dupaco

Thursday, February 24, 2011

FAFSA pitfalls can torpedo your college financial aid

It's open season for FAFSA filing - the Free Application for Federal Student Aid. The FAFSA is the government document families need to complete in order for their college-bound student to be eligible for college financial aid.

Some changes to the online form this year have made FAFSA completion easier, such as the ability to import data from an already-filed tax form. But this upgrade doesn't remove the potential for mistakes to be made on the FAFSA, mistakes that can cost a family to miss out on financial assistance.

Reporting for U.S. News, higher-ed journalist Lynn O'Shaughnessy recommends the following tactics for FAFSA completion to maximize the potential for financial assistance:

  1. Complete the FAFSA asap: If you procrastinate you could miss deadlines for state and institutional financial aid assistance.
  2. Don't mention retirement assets: One of the best ways to torpedo your chances for financial aid is to include your retirement assets on the FAFSA. Money that you have in 401(k) plans, Individual Retirement Accounts, and other qualified retirement plans should NOT be reported.
  3. Don't report home equity, vehicle values, household possessions, etc.: The FAFSA won't ask if you own your residence, so any home equity that you enjoy won't hurt your chances for need-based aid. (The FAFSA does ask about second homes and real estate investments.)
  4. Have the correct parent complete the FAFSA: For divorced or separated parents, the parent responsible for filling out the form will be the one who has lived with the student for the majority of the year - it will only be this parent's financial data that will be shared on the form, not both.
  5. Correct mistakes: Make corrections (even after submitting) by returning to the online form and clicking on "Make FAFSA Corrections." The government will process your changes within three to five days.

For more from O'Shaughnessy visit her blog The College Solution.

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