This is the time of year that parents with college-bound children dread. Why? Because it's FAFSA season.
The latest FAFSA, or Free Application for Federal Student Aid, which was released on Jan. 1, is a document that families must fill out if they want to be eligible for federal college loans and grants. Financial aid assistance through the states, as well as colleges and universities, also often require families to complete the FAFSA.
I've run across plenty of parents who worry that they messed up when completing their FAFSA. Paula Bishop, a CPA in Bellevue, Wash. and a friend of mine who has handled countless financial aid applications for clients, told me that she has never seen a FAFSA form completed by parents that didn't contain at least one error.
Here's what scary about that: even a single mistake can cost parents thousands of dollars in assistance.
If you plan to tackle the FAFSA in the next few weeks, here are seven tips to boost your chances of getting it right:
1. Don't dawdle: Complete the FAFSA soon. If you procrastinate until April, when your income taxes are due, you could miss deadlines for state financial aid assistance, as well as help from your child's school. If completing your income tax promptly is impossible, fill out the FAFSA with estimated numbers. If estimating, you can log back into your FAFSA account with the updated figures later.
[See why it might pay to wait until February to file your 2011-12 FAFSA.]
2. Don't mention retirement assets on the FAFSA: One of the best ways to torpedo your chances for financial aid is to include your retirement assets on the FAFSA. The FAFSA doesn't want to know about money that you have in such vehicles as 401(k) plans, Individual Retirement Accounts, and other qualified retirement plans. If you mention these assets on your FAFSA, your chances for need-based financial aid will shrink. Don't do it!
[View tips on how to report your savings on the FAFSA.]
3. Forget about home equity: The FAFSA won't ask if you own your residence, so any home equity that you enjoy won't hurt your chances for need-based aid. The federal financial aid form does inquire about second homes and real estate investments. In addition to a primary home, you also shouldn't mention vehicles, boats, furniture, and other household possessions as assets.
4. Have the correct parent complete the FAFSA: When parents are divorced or separated, make sure the right one fills out the financial aid form. The parent who is the legal custodial guardian won't necessarily be the one to complete the FAFSA. The parent responsible for filling out the form will be the one who has lived with the student for the majority of the year. If a child, for instance, resided with the father for seven months and the mother for five months, the dad would complete the document.
Ideally, the divorced or separated parent who handles the FAFSA will be the one with the lowest income. That's because only his or her finances will be shared on the aid form.
5. Ask for help: When filling out the FAFSA, you can obtain help through the government's toll-free number: (800) 433-3243. You can also take advantage of the government's online chat sessions by using FAFSA on the Web Customer Service Live Help from Monday through Saturday.
[Read 3 ways applying for financial aid will be easier in 2011.]
6. Correct mistakes: You can correct errors after you've submitted your FAFSA. Return to your online form and click on "Make FAFSA Corrections." The government will process your changes within three to five days.
7. Check out a sock puppet video: No, really. Kim Clark, my friend and colleague at U.S. News, assembled links of videos that can help you complete the FAFSA. One involves a sock puppet. No reason why you can't have a little fun with the FAFSA!