After you’ve been accepted to a college or university, and complete the FAFSA, you should receive a financial aid award letter. The typical financial aid award letter consists of the following: the college’s cost of attendance, college scholarships and grants, work study and loans.

After completing the FAFSA, your EFC (Expected Family Contribution) is calculated. The ideal award offers aid to make up the difference between the EFC and the cost of tuition. Before you choose a college‘s aid package, follow these steps to understand what you are being offered—award letters typically contain the following components:

1. “Free” Aid (Merit Aid)–This is money that you do not need to pay back. This can be in the form of federal and/or state grants, but might also come from the colleges themselves.
2. Federal Work Study–If you qualify for work-study, a certain amount of jobs are set aside on campus for students who qualify. You can use the earnings from this job to put toward your college expenses.
3. Loans–Pay attention to the types of loans offered to you—especially to see if they are subsidized (deferred interest during college) or unsubsidized (interest is NOT deferred during college). Remember, any money you borrow must be repaid, so think before you accept those student loan offers.
4. Your Estimated Family Contribution. Your award letter will list what they expect you to pay. Some colleges do not meet the full demonstrated financial need for all students, but instead leave a gap. This usually occurs at colleges with limited student aid budgets.

Special Circumstances

Sometimes events that impact your finances (job loss, divorce, unexpected medical costs) take place after a financial aid award is calculated. Or, your financial aid paperwork may seem like it doesn’t reflect your financial situation—such as taking care of an elderly family member. If you fall into any of these categories, contact your school’s financial aid office immediately—you may be eligible for additional aid.

Outside Scholarships

If you win any outside scholarships, you have to tell the college about them. Unfortunately, federal regulations require the college to reduce your need-based aid package when you win an outside scholarship. Colleges do, however, have some flexibility in how they reduce your financial aid package. Many will use the outside scholarship to first fill any gap, and then use half the funds to reduce loans and half to reduce grants. Ask the college for information about its outside scholarship policy if this will affect you.

Comparing Costs

Compare all the financial aid packages offered from the various colleges that you receive award letters from. Pay special attention to the type of aid that is awarded and make your college decision based on each college’s award package. You can decline to accept any or all of the aid that is offered. The U.S. Department of Education provides a simple worksheet to help you compare financial aid awards.

Dealing with a Gap

Colleges will often admit students but not meet their financial need. This is called “gapping”. When a college does this, they are basically saying that they need to meet their admissions quota, but aren’t willing to offer you any incentive to attend. In some cases the gap can be huge. When a college does this, they are hoping you will decline their offer of admission. What should you do? Decline it! They obviously don’t value your contribution to their student body. Choose a college that is willing to give you substantial aid because they want you to attend.

Negotiations

If you receive multiple awards you can use them to negotiate for additional aid. Use the awards as a bargaining tool with colleges and attempt to negotiate more aid.

Colleges use financial aid awards to entice students into accepting their offer of admission. This is the college you want to attend–one that values your contribution and is willing to put their money where their mouth is!

Do you have any questions about the components of a financial aid package? Leave us a comment and we will be happy to answer your questions!

• Your social security number
• Your driver’s license information
• Your 2010 W-2 forms and records of any other income
• Your 2010 Federal Income Tax return (does not need to be filed—you just need the information)
• Your 2010 Untaxed income records: child support received, worker’s compensation, veteran’s non-education benefits
• Your current bank statements
• Your current business and investment information
• Your alien registration or permanent resident card (if you are not a U.S. citizen)
• The school codes of the colleges you are applying to for admission

You will also need a PIN for electronically signing the FAFSA online. You can apply for this now, by going to www.pin.ed.gov and completing the information.

It is recommended that you complete the FAFSA on the web worksheet before completing the application. The worksheet will familiarize you with the information and allow you to complete the FAFSA easily once the worksheet is completed. There are also other worksheets available: dependency status worksheet, student’s income estimator, parents’ income estimator, and student aid eligibility.

If you haven’t filed your return yet, or don’t have all your information, you can use last year’s return as an estimate and file an amendment to the FAFSA once your return is completed. It is crucial to file the FAFSA as soon as you have the information, preferably by February 1^st. Colleges disperse financial aid based on the information they receive from the FAFSA and delaying its submission could cost you valuable award dollars. Don’t wait until April 15th; all the award money will be gone!

Do you have any FAFSA questions? Give us a shout out and we will be happy to answer them!

However, it’s not as complicated as some might think; especially if you avoid these common mistakes:

1. Don’t assume that your family income is too high to file the form. Even though you might not qualify for need based aid, you SHOULD complete the FAFSA. Colleges use the FAFSA information to determine all kinds of aid, including merit-based aid (which is not based on need). Plus, you can’t qualify for government loans if you don’t fill it out and submit it.
2. Don’t wait to file the FAFSA until your taxes are done. The sooner you get the form in, the sooner the colleges will be able to access the information and utilize it to determine financial aid. If you are able to file your 1040 early, that’s great; but don’t wait until April 15 to complete the FAFSA. If you do, you could miss out on all the money available through financial aid—it’s always FIRST COME, FIRST SERVE!
3. Don’t enter the WRONG income tax figures. Provide the federal income tax you paid or will pay based on your 2010 federal tax return—NOT the tax withholdings on you and your spouse’s W-2 forms. If you don’t have your federal tax return ready early, use last year’s return. You can go back and file a correction if you need to.
4. Don’t leave blank answers. If the answer is zero, write “0” or N/A. If you leave blanks you might cause miscalculations and the form could be rejected.
5. Don’t forget to list the colleges. On the FAFSA form, you can include up to 10 colleges that you are applying to. By doing this, the schools will get your information directly when the form is processed.
6. Don’t type a wrong Social Security or driver’s license number. Check and recheck these numbers for accuracy.
7. List the most current marital status. You need to state what your marital status is on the day you sign the FAFSA, whether you are married, separated or divorced. This affects the EFC (Expected Family Contribution) formula.
8. Don’t inflate your education. If both parents didn’t GRADUATE from college, don’t list “college” as the highest education attained. Plenty of colleges treat applicants more favorably if they are considered “first-generation” college students.
9. Don’t assume you won’t qualify for financial aid because of your home equity or retirement accounts. The FAFSA doesn’t even ask if you own a house so the amount of home equity is irrelevant. The FAFSA does ask about second homes or real estate investments, however. The FAFSA doesn’t have questions about retirement accounts. You can have hundreds of thousands stuffed away in retirement accounts and it won’t hurt your chances at getting financial aid. It does however ask about cash, savings and checking accounts.
10. Don’t assume that the federal FAFSA deadline for filing is the same as your state or college deadline. Always check with the financial aid office. But again, the best advice available is to file EARLY, as soon as the form becomes available and you have the required information.

Avoiding these 10 mistakes will assure your FAFSA is completed on time and correctly.

Do you have any FAFSA questions? I would love to answer them for you. Please leave a comment here and I would be happy to assist you.