File that FAFSA: Insider Secrets to the Financial Aid Form

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The Department of Education’s gateway to federal student aid is the FAFSA, the Free Application for Federal Student Aid. And now is prime time to tackle it: January is when students get serious about FAFSA filing and head for fafsa.ed.gov.

The FAFSA is mandatory to get a federal student loan; they must be filed to obtain a Pell grant and are virtually mandatory for most private student loans and state aid. For the 2015-16 school year, applications must be filed online by midnight June 30, 2016 Central Time for federal student aid. Corrections and updates can be made until September 23, 2016 midnight Central Time. Individual deadlines for state aid vary, but most states want FAFSAs to be filed as soon as possible after January 1.

The Department of Education (ED) has tightened FAFSA data sharing with colleges this year. “The list of colleges on the student’s FAFSA will no longer be shared with colleges,” said Mark Kantrowitz, publisher and VP of strategy for Cappex.com, a website that connects students and colleges with financial aid. “Since students tend to list colleges in preference order, some colleges were using this information to influence college admissions decisions.”

Students admitted to their first choice college enroll 50% to 65% of the time; students enroll about 33% of the time to their second choice but only 10% of the time to their third choice. Colleges trying to improve their acceptance rate might reject students who list them fourth or lower.

This, Kantrowitz said, leads to anomalous situations where a student is accepted by an Ivy League college but is rejected by a less selective school. To prevent this sort of abuse, ED will no longer let colleges see the lists of schools students applied to on the FAFSA. Students who want to apply for state grants must still list an in-state public college first.

A new Federal Student Aid ID was adopted last year, which is needed to start the process. ED describes the FSA ID as “your passport to federal student aid online.”

“The FSA ID replaces the FSA PIN with a user-selected username and password,” Kantrowtiz said. “This eliminates the need to reveal personally identifiable information each time a student logs into a FAFSA Website.” It also eliminates the need to change PINS following a marriage-related surname change.

Kantrowitz said that the process of obtaining a FSA ID (at fsaid.ed.gov) is a bit cumbersome, but expects it to improve over time.

Failing to file at all, Kantrowitz said, topped the list of filer mistakes.

“You can’t get aid if you don’t apply,” he said. “About two million students who didn’t file the FAFSA would have received a Federal Pell Grant” last year. Of these, 1.3 million would have qualified for the max grant.

Another mistake was reporting retirement plans and net equity in the family home as investments.

“Qualified retirement plans are not reported as investments or assets on the FAFSA, although distributions and contributions do count as income,” he said. “Likewise, the net worth of the family’s principal place of residence is not reported on the FAFSA.”

Marital status of a student’s parents can also trip up FAFSA filers. “If the student’s parents are divorced and the custodial parent has remarried, the stepparent’s income and assets must be reported, regardless of any prenuptial agreements,” said Kantrowitz. A custodial parent is the one with whom the student lived with the most or provided the most financial support.

“A common error is to not report the stepparent’s children from previous marriages,” Kantrowitz said. “If the stepparent provides more than half their support, the children from previous marriages get reported in household size and the number of children in college, even if they don’t live with the stepparent. Counting them in the number in college can have a big impact on eligibility for need-based aid.”

Not telling the college financial aid office about unusual circumstances can also cause problems down the road. “The college has the authority to make adjustments to the FAFSA data corresponding to documented special circumstances,” Kantrowitz said. “Sometimes the families don’t know that they can appeal these circumstances.” That includes job loss and salary reduction, resulting the an adjustment of aid awarded. Dependent care costs for a special needs child or elderly grandparent can also be grounds for appeal.

Errors that filers can control are among the most frequently made, including incorrect Social Security numbers and dates of birth. Missed filing deadlines, incorrect dollar amounts and transposed digits are not uncommon.

New this year is the apparent absence of pay-for-play FAFSA vendors that are selling FAFSA filing advice on the Internet that is available free from the Department of Education. Last year, FAFSA.com was shut down by the Consumer Financial Protection Bureau.

Discover Student Loans’ free FAFSA Assistant notes that it isn’t affiliated with ED and that it is indeed free. They’re interested in selling you a student loan, however.

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