The Free Utility for Federal Scholar Assist, or FAFSA, is your gateway to cash for school from the federal authorities, state governments, and most faculties or universities. The way you file the FAFSA could have an effect on how a lot cash you get and the sorts of monetary support you’re eligible for.
High Ten FAFSA Tricks to Maximize Your Eligibility
1. File the FAFSA early.
The sooner, the higher. You might have heard the usual music and dance about submitting the FAFSA as quickly as attainable on or after October 1 to keep away from lacking deadlines for state and faculty support. Nonetheless, the 2024-25 FAFSA will turn out to be obtainable in December. It’ll return to an October 1 begin date within the years following.
Greater than a dozen states award grants on a first-come, first-served foundation and 13 usually have deadlines in December, January, February, or early March. Faculties may also have early deadlines and even some federal scholar support could run out in the event you apply late. However, do you know that college students who file the FAFSA earlier could qualify for extra support? College students who file the FAFSA the month it opens are inclined to get greater than twice as a lot grant support, on common, as college students who file the FAFSA later. So, file the FAFSA as quickly as attainable to maximise your support eligibility.
2. Decrease earnings within the base 12 months.
The FAFSA calculates the household’s monetary power utilizing earnings and tax data from a earlier calendar 12 months referred to as the bottom 12 months. The bottom 12 months is the prior-prior 12 months. For instance, the bottom 12 months for the 2024-2025 FAFSA that college students began filling out in December 2023, is 2022.
Because the monetary support system is closely weighted towards earnings, it’s a good suggestion to reduce earnings in the course of the base 12 months. For instance, keep away from realizing capital beneficial properties in the course of the base 12 months. For those who should promote shares, bonds, mutual funds, and different investments, attempt to offset the capital beneficial properties with losses. You possibly can cut back your adjusted gross earnings (AGI) by having capital losses exceed capital beneficial properties by as much as $3,000. You must also keep away from taking retirement plan distributions in the course of the base 12 months because the withdrawals will depend as earnings on the FAFSA, even when they’re a tax-free return of contributions to a Roth IRA.
Each $10,000 discount in guardian earnings will improve support eligibility by about $3,000.
Each $10,000 discount in scholar earnings will improve support eligibility by about $5,000.
3. Cut back reportable belongings.
Though belongings don’t depend as a lot as earnings on the FAFSA, they might nonetheless have an effect on eligibility for need-based monetary support. You can also make cash within the financial institution disappear through the use of it to pay down unsecured shopper debt, resembling bank cards and auto loans. Not solely does paying off high-interest debt with low-interest financial savings make sense from a monetary perspective, however it would additionally show you how to qualify for extra monetary support. Paying off the mortgage on the household dwelling works on the FAFSA however could not work as properly on different monetary support varieties, because the FAFSA ignores the online price of the household’s principal place of residence whereas different monetary support varieties don’t.
4. Save strategically.
Cash within the scholar’s identify is assessed at a flat 20%, whereas cash within the guardian’s identify is assessed at a decrease charge, not more than 5.64%. So, it’s best to economize within the guardian’s identify, not the scholar’s identify. Fortunately, cash in a 529 faculty financial savings plan is handled as if it have been a guardian asset, no matter whether or not it’s owned by the scholar (a custodial 529 plan) or the guardian. Each $10,000 in guardian belongings reduces support eligibility by as much as $564.
5. Spend strategically.
For those who occur to have saved within the youngster’s identify, say in an UGMA or UTMA, repair the scenario by both rolling it right into a 529 plan titled the identical because the UGMA or UTMA account or by altering the account proprietor. You too can spend down the scholar’s cash to zero first, earlier than touching the guardian’s cash, in order that it received’t stick round to harm support eligibility in a second 12 months.
6. Coordinate 529 faculty financial savings plans with the American Alternative Tax Credit score (AOTC).
If the household is eligible for the AOTC, they need to carve out as much as $4,000 in tuition and textbook bills to be paid for with money or loans to maximise the AOTC. IRS guidelines forestall double-dipping, so you possibly can’t use the identical certified larger training bills to justify each a tax-free distribution from a 529 plan and the tax credit score. The AOTC is price extra, per greenback of certified larger training bills, than a tax-free distribution from a 529 plan.
7. Attraction for extra monetary support.
Attraction to the faculty’s monetary support workplace when you have a number of kids in faculty on the similar time. You too can enchantment for extra support when you have uncommon or particular circumstances, resembling a giant change in earnings from the prior 12 months, excessive unreimbursed medical or dental bills, or excessive dependent care prices for a particular wants youngster or aged guardian.
8. Even rich college students could get some support.
Monetary support is predicated on monetary want, which is the distinction between the faculty’s price of attendance (COA) and the scholar support index (SAI). So, there are two methods to extend monetary want and thereby improve monetary support. One is to file the FAFSA in a means that minimizes the SAI. The opposite, nevertheless, is to extend the COA. Wealthier college students could qualify for support at higher-cost faculties or when a number of kids are enrolled in faculty on the similar time. Except a scholar’s dad and mom earn greater than $350,000 a 12 months, have greater than $1 million in reportable web belongings, and their youngster is enrolled at an in-state public faculty, they need to nonetheless file the FAFSA.
9. The FAFSA is a prerequisite for low-cost federal training loans.
To qualify for the unsubsidized Federal Stafford Mortgage and Federal PLUS Mortgage, the scholar should file the FAFSA first, although these loans can be found with out regard to monetary want. Even rich college students could qualify for these loans.
10. Hunt down beneficiant and low-cost faculties.
There are about six dozen beneficiant faculties, together with Ivy League, which have adopted “no loans” monetary support insurance policies. These faculties change scholar loans with grants within the scholar’s need-based monetary support bundle. Additionally, in-state public faculties could also be your least costly choice, even after subtracting present support like grants and scholarships.
Now that you understand how to file the FAFSA to get extra money in faculty, be sure you keep away from these ten frequent errors when finishing the FAFSA.
For extra data on the FAFSA, take a look at “What’s the FAFSA and why is it essential?“
