Daily Aid 28: FAFSA Secrets and Hidden Traps

22 October 2008 1 views No Comment

Daily Aid 28: FAFSA Secrets and Hidden Traps

A special blog post while I’m on the road to Arizona for a couple of days off – and yes, vacation for me is doing public speaking! I’ve been working on the 2009-2010 FAFSA guide for the coming year over the past week or so, learning the ins and outs of IRS tax code, the new draft FAFSA (which won’t be finalized until November), and a bunch of stuff that goes with it all. Some interesting lessons I’ve picked up so far:

The FAFSA has a LOT of undocumented gotchas, far more than the average student is probably prepared to deal with. For example, Question 23 on the 2009 FAFSA asks if you’ve ever received a conviction for illegal drug use while receiving federal financial aid. What the question doesn’t elaborate on anywhere is that the conviction has to be a federal or state conviction to disqualify you from financial aid. A local/municipal court conviction has no impact on your financial aid, but the question isn’t worded that way. The question doesn’t elaborate anywhere that if you’ve successfully completed an accredited rehab program, the conviction will be disregarded for the purposes of financial aid. The question also doesn’t make clear enough that you have to have received it WHILE receiving federal financial aid, so if you messed up in high school and have since cleaned up your act, that prior conviction is meaningless from the perspective of financial aid.

Why is this important, particularly when the form goes on to say you’ll get an additional worksheet in the mail to determine your eligibility? That kind of question is a showstopper. That kind of question is likely to cause someone to self-select out of the financial aid process, and in doing so, alter their future.

A lot of students fill out the IRS 1040EZ form, for those who file taxes. This may turn out to be a huge mistake, since the full 1040 contains three provisions that are important for college students. First, the full 1040 allows you two offsets to adjusted gross income, one for student loan interest paid and one for tuition and fees, that will reduce your AGI. Reducing your AGI has a direct impact on your financial aid – the lower your AGI, the more eligible you are. The full 1040 also has an AGI offset for moving expenses, which might impact you. If you’re an independent student, filing a full 1040 rather than a 1040EZ is absolutely essential, since your finances alone will impact the FAFSA and not your parents’ finances.

Here’s why this is a gotcha – nowhere on the FAFSA does it recommend you do a full 1040 rather than the 1040EZ. Yes, the EZ is “easier” from a paperwork perspective, but it may be costing you some serious money.

There are also new provisions for homeless students, unaccompanied homeless students, and students in danger of homelessness that will simultaneously open up opportunities for more students while also proportionally adding complexity to the financial aid office, so be aware that lines this coming year might be a little longer.

Overall, the FAFSA has changed quite a lot from previous years, and knowing some of the tricks to maximize your aid is what we’re all about in the new guide. I expect to have a beta available to you, my dedicated listeners and readers, by mid-November, with the full version going out with all the bells and whistles in January. As always, to thank you for reading and listening, you’ll get first crack at whatever I find, whatever inside secrets I can share with you to make the financial aid process easier.

Did you enjoy this? If so, please consider subscribing for free to get it delivered to you. Subscribing for free means you don’t have to remember to download it every day.
+