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Financial Aid Mistakes
Some people think once they have found some scholarships to apply for and filled out their FAFSA, they've done what they can to get money for college. Not true!
Our economy is challenging and the IRS tax code is beyond complex. Unfortunately the rules regarding how much aid you can getare almost as involved. So it's no surprise that you can easily miss financial support to which you are entitled. This fact applies not just to those facing serious financial need. It is also true for families with substantial incomes.
A missed opportunity could be as simple as forgetting that you must fill out a new FAFSA every year. Here we share some less known and often overlooked tips and secrets even the most financially sophisticated might miss.
Maximize Financial Aid Regardless of Income
If you haven't already, be sure to read the basics in Grants and Scholarships and Financial Aid. Now you're ready for some advanced learning! With it you can make the most of your college savings and legally save as much of your assets as you can. Here are our six super secrets to maximize your financial aid:
- Whether you think you or your family makes too much money to qualify for help, always apply for financial aid. According to well-known financial service provider Sallie Mae about 30% of those with high incomes don't bother to apply for any aid. Yet many families earning over $100,000 annually receive over $5400 in grants and scholarships in a single academic year. Perhaps not a huge number, but why not invest it rather than spend it?
- If you think you need to rule out expensive private colleges because you won't qualify for aid, you may want to think again. Go to the website of colleges of interest and use their net price calculator. According to the Wall Street Journal you may be startled by the results. Some are generous enough that your overall cost could be less than what you will have to spend at a public university in your state.
- Be careful when you earn your money. This advice may sound strange, but it's important to understand how numbers are determined. When calculating your aid award the "base income year" as defined by the FAFSA is the year before you or your child starts college. Wherever possible it is wise to move some income into a different year. You could receive an extra $3,000 in aid for every $10,000 reduction you can make in your legitimately reported income.
- Learn how to read your aid package carefully. It's easy to make the mistake of homing right in on the "EFC", or Expected Family Contribution. In fact, that number may only be part of what you're being expected to come up with. Read carefully to determine if part of the total package includes loans which you or your parents will be expected or encouraged to take out.
- Speaking of loans, don't be fooled by some promotions from private banks which make it look like you are getting a better interest rate and thus a better deal than what the school or government is offering you. They may be offering a variable rate which could increase your costs in the future. And they probably don't offer the same opportunities to defer or avoid payments in the event of financial difficulties.
- If you as a parent have been wise enough to establish an account held in your child's name, look into transferring those funds into a 529 plan. By doing so you will likely be able to reduce the amount by which those funds could decreate the amount of aid your child can receive.