Imagine you are in a rush. Your heart is racing, adrenaline pumping through your veins. Now imagine you have to make a major financial decision while in that state of mind – a financial decision that might impact you for the rest of your life. And you must make it immediately because you are running out of time.
Not an optimal situation.
For many Americans, some of the hardest and most impactful financial decisions are made while in a frenzied state of mind. This is never more so when reviewing the financials around your child’s college tuition. It seems like senior year flies by in a flash as you go from college applications to writing the first tuition check in the blink of an eye.
But for parents who are navigating their child’s college application process, there is a way to exercise financial mindfulness. That is – control the controllable, including the pursuit of financial aid. Financial aid can be a confusing process with the risk that if not done properly, your child might have to take excessive student loans in order to go to school.
Ronald Ramsdell, Founder of College Aid Consulting Services in Minneapolis, MN, emphasizes the need for organization. “When pursuing financial aid, families need to start the process in a timely manner. It is important to know that for many colleges, there will be two of three different formulas involved when determining financial aid.”
FAFSA and It’s Importance
One of the biggest components to financial aid success is just upon us. The Free Application for Federal Student Aid, otherwise known as FAFSA, will start its application season on Monday, October 1st. The FAFSA filing is key in helping your child succeed financially at school as it gives access to the largest source of financial aid to pay for college.
It’s important for all parents and students to go forward with completing FAFSA. NerdWallet found that in 2017 that over $2.3 billion was left on the table in free federal grant money. Further 36% of high school graduates in 2017 didn’t even complete FAFSA.
The early start to this application process might surprise some parents. Up until 2016, the application process did not occur until later in the year. The old process had parents looking at the most recent calendar year and making estimates on income. It was not the most accurate of practices. Today, the process has been updated so that parents can use the data from their filed 2017 tax return.
“The idea of moving the application start to October 1st meant that families could get form done sooner with more accurate and easier to obtain information,” says Kathy Ruby, Director of College Finance at Bright Horizons Education & College Advising. “The hope was that colleges would respond and get awards out to families sooner. And this has happened at some level.”
While many parents think they need to wait until their child has applied or been accepted at a school, that simply isn’t the case. You want to put your child in the optimal situation to get aid. State and school aid can often be awarded earlier in the process and you want to make sure your child can be a contender for it.
But There Is An Exception To Filing FAFSA As Soon As Possible
But there is a group of parents that will need to carefully consider when they file FAFSA. While FAFSA will ask for income data for 2017, they will also ask for a listing of savings and investment assets. This listing does not include retirement plans or home equity. The issue that comes up if the parents currently have a large amount in savings and investment accounts that are going to be spent down shortly. A great example of this is if a family is waiting to close on a home and has the down payment in their bank account.
In that situation, Ramsdell advises that “You don’t want to file FAFSA right away. You should consider asset reallocation scenarios in order to put yourself in a better position.”
Ruby agrees. “The asset questions are as of the day you are completing the form. There is no lookback. If you have assets being moved, then you should wait.”
Additional Filings Parents Need to Consider
FAFSA isn’t the only filing that parents have to consider. There are two additional filings that might be required for your child’s school: CSS Profile and specific institution forms.
“The CSS Profile from The College Board is used by many private colleges,” says Ramsdell. “The CSS Profile helps to obtain non-federal, need based financial aid and grant money.”
The CSS Profile is also starting its application period on October 1st so that it can be completed at the same time as FAFSA.
There are also institutional forms that a small group of schools require to be complete. Ruby suggests “You have to research each college’s website to see if the form is required.” She notes that “however, the vast majority only ask for FAFSA.”
Ways To Get Help
With all of these deadlines, it can be an overwhelming process for parents. Being organized is the first step. But in the event parents need help, there are a number of ways to obtain it.
“There a lot of places you can get support for help in financial aid support. One of the best places to start is your high school guidance counselor. Many states provide organizations to help. There is even a FAFSA Hotline.” Says Ruby. “Remember, there is very little you can do to game the system.”
Ultimately, being organized and filing for financial aid earlier gives parents and students more power in making financial decisions about college. Often the best financial decision making is done when individuals have time to think through various scenarios. It’s the first step for your child’s future financial success.