One on one with a financial aid professional

Varsityedge.com recently sat down with certified financial planner Janet Rhodes Friedman of Abaris Financial Group. Janet has been studying the financial aid process for the last five years and has gone through the process as a parent of two.

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What is your background in the Financial Aid Process?

I have been doing comprehensive financial planning since 2009 which includes college funding strategies for my clients with minor children or college-age children.  I develop college funding strategies for each family, with cash flow projections for all the years their children will be in college.  This provides guidance to families about how every year of college education will be funded, not just the first year for each child.  I start the process early with each client to ensure that all strategies can be considered and implemented.  I also encourage my clients to consider requiring their children to have some “skin in the game.”

Not only do I “talk the talk”, but I “walk the walk”. I have current personal experience with the financial aid process.  My daughter attends Yale University and I have completed the CSS Profile and FAFSA financial aid forms with her the past five years (she decided to take a gap year before entering college).  My son will enter U MA Amherst this fall (FAFSA only).  I understand how complex and frustrating the process can be – but also how best to present your family’s finances to receive the highest financial aid possible.

What are some common misconceptions you see in the Financial Aid process?

  • Not understanding how to apply for financial aid
  • Assuming a student won’t qualify for any aid so the families don’t apply
  • Missing out on merit aid opportunities because some schools require that students apply for aid to be considered for merit grants
  • Not realizing a student must apply for aid every year – and that their aid package will change year to year
  • Unrealistic expectation about how much aid a student will receive
  • Confusion about federal financial aid (FAFSA) vs. private school-based aid (CSS Profile)
  • Believing that loans (Stafford loans, parent PLUS loans) are financial aid. Loans are one way to pay for college but are not “aid” per se.
  • Confusion about how to compare financial aid awards from different colleges – and expecting the same $ aid from each college
  • Not understanding that it may be less expensive for a student to attend a more costly private college than a public university

What is the FAFSA Form?

All students (and parents, if the student is a dependent) seeking financial aid must complete the FAFSA (Free Application for Federal Student Aid).  The FAFSA is the official form used to request federal, state and school assistance to pay for college (www.fafsa.ed.gov).  Most students submit the FAFSA online (although it is possible to submit it via mail).  Beginning in fall 2016, the FAFSA becomes available each October.  The financial information required for FAFSA will be based on the prior year income tax returns.

FAFSA asks questions to determine a student’s level of financial need.  It takes into account the family size, number of family members in college, and taxable and nontaxable income.  Based on the information submitted, a Student Aid Report (SAR) is produced, an estimate of what the student and parents are expected to pay out of pocket for the student’s college expenses.  This is known as the Expected Family Contribution (EFC) using the Federal Methodology (FM).  The federal government, each college the student is applies to, and the state where the colleges is located all use the FAFSA to determine how much financial aid to grant to each student applying for aid.

What are some common mistakes parents make when filling out the FAFSA form?

  • Inconsistency between FAFSA data and income tax data provided
  • Providing inaccurate values for real estate and investment assets
  • Under reporting income and expenses
  • Excluding various types of income and assets
  • Clerical errors
  • Dishonest answers assuming they will not be caught
  • Not reapplying every year for aid
  • Filing FAFSA too late in the financial aid process
  • Not linking the FAFSA to the IRS DRT data base (required by most colleges)
  • In divorced families, not understanding how the custodial/non-custodial rules apply

When should a family realistically start planning for the Financial Aid process for college?

The best time to think about paying for college is early, ideally no later than 8th or 9th grade.

Tell us a little about the CSS PROFILE form.

In addition, some private colleges also require completion of the CSS/Financial Aid Profile (or a school-specific questionnaire).   This is far more comprehensive and includes a wide range of family assets including family farms and home equity.  It also assumes the student will work part time to pay for college expenses.  The formula used is known as Institutional Methodology (IM).  The CSS Profile is administered by the College Board.  It is rare that the EFC using the Federal Methodology will be the same as the EFC using IM.

Schools that currently require the CSS Profile: GO

Each year more information is requested, and questions are added or changed.  Some colleges ask how many cars you own, including make, model and year.  Some ask about trusts, something that was not required to be disclosed until recently.  The rules have recently changed regarding divorced parents; most colleges now require disclosure by both parents, custodial and non-custodial.

Do you find that many parents are so intimidated by the Financial Aid process, that they fail to do even the basic steps that can help them?

Yes – very often! It’s important to try and learn the process. There is a lot of information and guides you can access online, but if you really feel you need help, try and seek out a financial aid professional with experience in the process.

What other aid and loan programs are available that families are not familiar with?

  • Local grants and scholarships
  • Employer scholarships
  • Tuition discount if student is child of university employee
  • Income tax credits
  • Cash in Series EE bonds tax-free (Income limits apply)
  • Seek colleges that will provide higher aid because the college really wants your child to enroll
  • Consider colleges that are not the most visible or popular colleges
  • Earn college credit through CLEP and AP exams
  • Attend a “work” college that offer internships
  • ROTC program and the U S Military academies
  • Appeal your student’s financial aid award
  • Use a home equity line of credit instead of more expensive private or PLUS loans
  • Ensure student stays on track to graduate in 4 years

What little things can a family tweak or change in their finances to help them receive more aid?

  • Ensure family assets are best positioned to receive highest amount of aid
  • Use UGMA accounts for pre-college expenses (or transfer the UGMS $ to a UGMA 529 plan) so the $ don’t count against the student’s assets in the aid formulas
  • Wait until student’s senior year of college to use 529 plans owned by a grandparent or other individual
  • Maximize tax credits for education on income tax returns
  • Save for college tax-deferred in a 529 plan or Coverdell account

What other things can help a family earn more financial aid?

  • Stand out as a student in some capacity (grades, talents, community service)
  • Apply to schools “off the beaten path” and/or schools trying to attract students from your area or region
  • Consider community college or in-state public university for first two years, then transfer to the student’s “university of choice” for final two years
  • Talk with your children openly and honestly early in the process – and let them know what your family can afford (or not afford)