College financing: The FAFSA and how it will get easier to apply for financial aid

Every January I see the horror on families faces because they have to fill out the FAFSA form.  The FAFSA stands for Free Application for Student Aid.  It’s the application every student has to fill out in order to receive any federal money.  In many cases this form is required to receive money from the schools.  This form is critical for many families because it will determine their college financing.  Will they get free grant money or student loans or worse have to pay for all of it with out of pocket money?

If you’ve ever filled out the form you know, it’s like doing your taxes while sitting on broken glass.  The form is not difficult but it’s very easy to make a mistake if you don’t read the directions.  Additionally, every parent knows this is the form that will determine if they can afford to send their kids to college.
Last year the form had 153 questions.  One problem parents have is when they ask about your information…they are actually referring to the kids not the parents.  Many times parents will start entering their information.

Remember your children are applying for the aid….you’re just going along for the ride.  They also ask questions multiple times.  For example they ask how old you are in a few different ways.   Education Secretary Arne Duncan, however, has outlined a series of changes that could allow some applicants to skip many of the 153 questions.

The basic purpose the of the FAFSA is to collect as much data and make an accurate estimate on what your family can afford to pay each year for college.  The information from this form will determine your college financing package.  Asking more questions in a few different ways may seem redundant but it will give them more confidence in the answers you give.   It’s clear, however, that the government is going to shorten the form.

Back in the last days of the Busch administration, they asked to lower the number of questions from 153 to 27.  Congress did nothing at that time but now it looks like they will.  Next year people should see 20% reduction in questions and less web pages to navigate.

Next year’s FAFSA will be quite a bit shorter.  The current form, which ranges between 120 and 150 questions, will be significantly reduced as the Department of Education eliminates many unnecessary, duplicative, and confusing questions.  This should make it easier to apply for aid and encourage more to apply.  There are families that skip this form because they find it too intimidating.  According
to the Department of Education, these are folks who would have qualified for aid but left money on the
table.

There are also other changes coming…. Some of these are good and some are not so good.  Each student has an income protection allowance.    In other words they can work but if they make more than a designated amount, it will hurt them in the formula.  *The Income Protection Allowance for students will increase 20%, from $3,750 to $4,500.  This means students can earn as much as $4,500 without affecting their chances at financial aid.  So if your son or daughter is industrious and earns more than $4,500 it will penalize them.  That’s the government!

There is definitely a bad side to these changes.  Parents have an asset protection allowance.  This means you can have some money in the bank and it does not hurt you.  The Asset Protection Allowance for parents will actually decrease between 3-5% for married parents, and about 8% for single parents.  So what the Dept. of Education is saying is that, ‘we recognize that your stock portfolios are down, but we’re going to allow you to protect less of your assets in determining what you can pay for college’.  Talk about a double-edged sword!
The bottom line is the forms are going to get easier, but the formula is changing as well.   The planning process should be set up as soon as possible.  What do you think of the changes in the financial aid process?

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Tagged as: college financing, Fafsa, Financial Aid, How To Pay For College, Student Financial Aid