By Lynnette Khalfani-Cox, The Money Coach®
When your son or daughter goes off to college, you most certainly will want your student to get the maximum college financial aid possible. Squeezing the most out of the financial aid system starts with understanding the type of aid available to your family, as well as the steps you and your child must take to qualify for aid.
Here are five tips to receiving the maximum financial aid available.
Tip #1: Distinguish between need-based aid and merit-based aid
Need-based financial aid is tied exclusively to your family’s financial circumstances. As such, need-based aid takes into account factors such as your household income, the number of children you have in college, your assets, and sometimes (typically for private schools) whether you are a homeowner and have home equity.
By contrast, merit-based aid is dependent upon the student’s accomplishments, based on factors like academic, athletic or artistic achievement. Community work and volunteer service can also earn students merit-based aid.
Whenever your child is applying for college financial aid, always know which type of aid it is, or whether it’s a combination of the two.
Tip #2: Complete the FAFSA as early as possible
The FAFSA is the Free Application for Federal Student Aid. It determines a student’s eligibility for virtually all college scholarships, grants, work-study and educational loans. This includes money from federal and state sources, along with institutional funds granted directly from colleges and universities nationwide. Don’t make the mistake that so many parents make in failing to fill out the FAFSA. Some people think they earn too much to qualify, or that the FAFSA is just too long and complicated. But to maximize your college financial aid package — especially free money — you absolutely must complete the FAFSA.
You can fill it out starting in October, and it’s best to submit the form ASAP, especially since some schools use the form for determining institutional aid that’s doled out on a first-come, first served basis.
Tip #3: Don’t overstate assets and income
The FAFSA does ask detailed questions about your assets and income. While you always want to answer questions honestly and accurately, it’s also important to know that you are legally allowed to exclude or omit certain income sources and various assets you may own.
For example, when applying for college financial aid, you need not report any of the following as assets: your primary residence, the car in your driveway, a boat you may own or any furniture in your home or apartment. Additionally, don’t report untaxed Social Security as income.
If you mistakenly report these items on the FAFSA, you will erroneously increase your Expected Family Contribution, thereby slashing your college financial aid.
Tip #4: Update financial aid officers when circumstances change
Once you complete the FAFSA, any time something important changes with your family’s economic circumstances you should update your FAFSA and/or notify the financial aid staff at the schools to which your student is applying.
Any of the following changes are significant enough to merit an update to your FAFSA information: a divorce by the student’s parents; a parent’s job loss; large or unexpected medical bills, or a new medical crisis that will tax your family’s resources for the upcoming school year.
Tip #5: Seek outside scholarships and grants
Be sure to pursue scholarships and grants — also known as “gift” aid, every year of college to lower higher education expenses. The good thing about this form of financial aid is that it’s free money that doesn’t have to be repaid. When your child completes the FAFSA, he or she is automatically considered for federal college grants, including Pell Grants or Supplemental Educational Opportunity Grants.
You should also seek out other sources of grants and scholarships that are offered by an array of local institutions, community-based groups, non-profits as well as corporate sources.
By using these five strategies above, you or your child can squeeze the most possible money out of federal, state, school-based and other sources of college financial aid and complete their degree with fewer financial worries and, hopefully, fewer student loans.
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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or GreenPath Financial Wellness counselor who can help tailor a solution for you.
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