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11 Tips to Mastering the FAFSA

Cash for College


In a continuing trend of a widening gap between the cost of higher education and the family income required to pay it, 2012 is shaping up to be a struggle for parents and a boon for colleges, nonprofit or not. For financial aid expert Kal Chany, the corporatizing of higher education is driving the trend.

“Most people assume that a college’s aid office is looking out for their best interests, but that’s not the case,” says Chany, author of Paying for College Without Going Broke, a guide now in its 20th edition with a foreword by Bill Clinton. “In reality there’s a lot of aid leveraging, and they are just trying to figure out the least amount they can offer you and still have you attend their school.”

With that in mind, families planning for a child to attend college this year need to view the process as a negotiation, dependent as much on presenting a good case as on meeting the raw numbers. With the fundamental Free Application for Federal Student Aid (FAFSA) changing every year and forming the basis for many students’ aid eligibility, Chany shares some essential tips for planning education financing in 2012.

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Get Your Timing Right


Because the FAFSA becomes active on Jan. 1, there is an assumption among many college-bound students and their families that the best way to get the biggest chunk of that limited pool of aid money is to apply early. But that’s not always the case, since different states have their own filing deadlines (see your state’s deadline on the FAFSA website).

“Getting it in super early is not what’s important – it’s not the Oklahoma land rush,” Chany says. “Some states are first-come, first-served with state aid but they won’t run out in the first week of January. Some states like Texas will even benefit those who wait longer because they process completed files first, and early filers might have to go through a verification process for the provisional financial information they provided that can end up extending the process.”

One scenario when timing will matter, though, is if you expect a financial windfall that would push your income level up. Because aid eligibility, determined by the “expected family contribution,” is determined by income at the time of filing, applications should be submitted before that money hits your bank account.

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Manage Multiple Deadlines


Regardless of when your state’s FAFSA deadline falls, Chany reminds all of the families he consults that it is not the only deadline to worry about. At certain schools and in certain states, filing the FAFSA is just a formality; the real decision may be based on other and more detailed aid documents that have earlier deadlines and require more legwork to complete.

One such form is the CSS Profile, which is created by the College Board and used by hundreds of schools to determine how to distribute their own pools of aid money. While the FAFSA focuses on the previous year’s gross income, Chany says, the CSS Profile takes a broader view, asking for more detailed breakdowns of income (how much came from wages, how much from investments, how much from real estate, etc.) going back several years and including estimates for the coming year.

Overall, Chany points out that there are up to 30 forms a school could potentially request, so the first step for any applicant is to determine exactly which forms will be needed and the deadline for each one.

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Open the Lines of Communication


Let’s face it: If there are a dozen documents you need to file, some of which depend on rounding up esoteric financial information from multiple family members whose accountants may not be the fastest in turning around data, you may miss some deadlines.

But even though deadlines are important, that may not be a deal breaker.

“If you aren’t going to be able to meet every single deadline for each form,” Chany says, “be proactive about talking to the school – they may be able to award you aid but have it be provisional until you are able to submit finalized forms.”

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What to Do About Taxes


Besides the self-reported information provided on a student’s FAFSA form, the other standard information that goes in everyone’s application for aid is taxes. And this year the FAFSA includes a new data merge tool that, if used properly, will streamline the process by connecting your application for aid directly with the tax records on file with the Internal Revenue Service.

“You don’t have to have your taxes done to apply,” Chany says, “but the school may need your final taxes before they make a decision, so you need to do it quickly.”

The best way, he says, is to file your taxes electronically as soon as you can. Within a few days or a week, according to Chany, the information will be available to merge with your FAFSA, and your application will get processed that much more quickly. Anyone who submits their taxes on paper and doesn’t use the digital tool must provide tax transcripts along with the FAFSA, with all the processing delays that entails.

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Make a Name for Yourself


Because of that new income verification tool, having your personal information correct and consistent is more important than ever. And it may sound like a no-brainer, but married women especially need to make sure their names are correct everywhere. This is especially a problem, Chany says, since the FAFSA draws from the information registered with the Social Security Administration, while the IRS has its own database.

“If a mother didn’t change her name with the Social Security Administration but did on her taxes, that may be a problem,” Chany explains. “The simplest way to verify is to use the Social Security benefits mailing that goes out at the beginning of the year and make sure that’s the exact name you use for your taxes.”

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Speaking of Taxes...


One of the main challenges of navigating the FAFSA is the fact that the Department of Education does not make public the formula it uses to determine the pivotal “expected family contribution” that assesses your need.

“The higher education industry and the federal government would prefer that people don’t know the formula so they don’t try to game the system,” Chany says. “So whereas taxes are clear about how each item affects the bottom line, the FAFSA isn’t.”

That means that people in certain family situations can see a range of needs assessments depending on how they file their taxes and how they report income on the FAFSA. For example, someone who was widowed last year will have their former spouse’s information on their taxes, but they must remember not to count it on the FAFSA. Similarly, couples who married in 2012 but were not married in 2011 will not submit the same income information on the FAFSA as they do on their 2011 tax forms.

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Beware of Double-Counting


As many students work for some amount of time to save money for their own education, student income is another place where Chany frequently sees mistakes happen and that income double-counted. The problem, he says, is that many applicants will include student income in the “family income” section, and then later on include it again on the “student income” section, but the latter is the only place that money needs to show up.

“It was an error we corrected but one that would have cost $1,000 in aid,” Chany remembers of one student he worked with, “or even $4,000 over four years if he had not revisited the form.”

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Take Each Question Seriously


One common analogy Chany likes to make (and for someone who has been advising families on education planning for 27 years, it’s coming from experience) is that the FAFSA is like the SAT: Anyone can take it but what matters is what you get on it.

“The real process,” Chany says, “is understanding why they are asking you the questions and how the responses to those questions affect the assistance you get.”

That means that innocent-looking questions that give you a choice of yes/no/not sure may imply a lot. Because they don’t give you the formula, you don’t know how your answer to each of those questions may affect the bottom line. As a general rule, then, applicants must treat each question seriously and provide an accurate answer, which becomes easier with the line-by-line guides contained in a book like Chany’s.

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Hire a Professional


As is the case in business, with financial aid sometimes you need to spend money to make money. As an education counselor Chany has a personal interest in directing people to professionals like himself to get the most out of their applications, but the FAFSA’s fundamental lack of transparency in its methodology provides a compelling case for hiring a professional.

“Most people get advice from friends and family and it’s like the blind leading the blind,” he says. “You don’t need to hire someone to fill out the forms, but you do to get the best results. And it’s the results that matter.”

His agency, CampusConsultants.com, charges a $1,550 fee, and he says that most families end up saving many multiples of that in aid. But whether or not you enlist the services of a professional, keep in mind that financial aid is a complex process and you will need to do a lot of legwork.

“You have to commit to becoming an expert in this or hiring an expert to get the most that you are legally entitled to,” he says.

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Keep Them Guessing


Once your application is submitted and complete, your offer of aid will usually come along with your acceptance to the school. And while many families see this as a starting point for negotiations to increase the amount before the acceptance deadline, Chany recommends a bit of patience before appealing.

“Sometimes people get the aid package and immediately call to appeal and ask for more,” he says. “But if you call immediately that is a signal to the school that this is the student’s top choice and that he or she is just eager to get more money from the school they plan to attend anyway.”

Waiting, then, will send a signal that you are more price-sensitive or are comparing offers from other schools, which puts you in a better position for an appeal later in the process.

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Look to the Future


As anyone involved in education planning will tell you, it’s important to remember that you need to reapply for aid every year you attend college, so you can change some of your financial behavior now to ensure a better aid package for the following year. Even if you did some things that pushed your expected family contribution in the wrong direction this year (such as taking capital gains or early withdrawals from IRAs), you can make up for that by planning your finances differently for next year.

So remember, financial aid is a continuous process, and it’s never too late to get new help in financing your education.

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Greg Emerson is a writer/editor for MainStreet. You can reach him by e-mail at greg.emerson@thestreet.com , or follow him on Twitter at @emersongreg.

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