A new and unfamiliar question has popped up at the end of the FAFSA this year… “Select the rigorous high school program of study that you completed.”  This question has confused a lot of parents and students; particularly when one of the available answers is the Department of Defense education activity course.

This question specifically addresses the student’s eligibility for the Academic Competitiveness Grant (ACG).  To qualify for the ACG, the student must:

1. Be eligible for the Pell Grant
2. Be entering the Freshman or Sophomore years of college
3. And have completed a rigorous secondary school program of study.

So what is a rigorous secondary school program?  According to the Department of Education, a rigorous secondary school program of study meets any one of the following five criteria.

1. Rigorous secondary school programs designated by state education agencies (SEAs) and state-authorized local education agencies (LEAs) and recognized by the Secretary of Education.
2. Advanced or honors secondary school programs established by states.
3. Secondary school programs identified by a state-level partnership recognized by the State Scholars Initiative of the Western Interstate Commission for Higher Education (WICHE) of Boulder, Colorado.
4. A program for a student who completes at least two courses in the International Baccalaureate (IB) Diploma Program with a score of four or higher on the course examinations or at least two Advanced Placement (AP) courses with a score of three or higher on the College Board’s exams for those courses.
5. A secondary school program in which a student completes, at minimum:
• Four years of English;
• Three years of math, including algebra I and a higher level class such as algebra II, geometry, or data analysis and statistics;
• Three years of science, including one year each of at least two of the following courses: biology, chemistry, and physics;
• Three years of social studies; and
• One year of a language other than English.

For most students, the last two qualifiers are likely to be the ones to fall under.  Either your student has taken AP courses or they have completed the classes indicated in #5.  For those students who have gone to military provided schools (either state-side or overseas), you would fall under the Department of Defense Education Activity Course.

According to a source at FAFSA that I spoke to, it is fine to leave this question blank and then go back and amend it after your student has completed the necessary course of study.

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“How do I file as an independent on the FAFSA?” or “How do I qualify as an independent student?” are some of the most common questions asked this time of year.  Once students and parents start digging into the FAFSA form, they quickly realize that independent students have lower EFC’s and therefore have a much better opportunity for financial aid than dependent students.  When this realization is coupled with the common position that “College is my student’s responsibility, not mine…” families quickly look to find out what does it take for a student to file as an independent on the FAFSA form.  It’s difficult… very difficult.

It is not as simple as not claiming your child as a dependent on your tax forms.  That is only a very small, if even insignificant aspect of student dependency status.  Below are the questions that the FAFSA form uses to determine dependency.

1. Are you older or will you be older than 23 during the award year?
2. Are you married?
3. Are you working on a graduate level degree?
4. Are you currently serving in the US Armed Forces other than training?
5. Are you a veteran?
6. Do you have children you support more than 50%?
7. Do you have other dependents you support more than 50%?
8. At any time since you were 13 regardless of present condition… are your parents deceased, or in foster care, or a ward of the court?
9. Are you or were you an emancipated minor as determined by a court?
10. Are you or were you in legal guardianship as determined by a court?
11. At any time on or after July 1, 2008, did your high school or district determine you to be an unaccompanied youth who was homeless?
12. At any time on or after July 1, 2008, did the director of an emergency shelter or federally funded transitional housing program determine you were a unaccompanied, homeless youth?
13. At any time on or after July 1,2008, did the director of a runaway or homeless youth center determine you to be an unaccompanied youth who was homeless or were self-supporting at risk of being homeless?

Questions 1 through 8 were the standard dependency questions for years.  Not until last year have the questions been expanded.

These questions are pretty straight forward.  If the student can answer “yes” to any of the above questions, then they can file “independent” status.  If they cannot answer “yes” to any of the above questions, then the student will be considered a dependent student.  In some very unusual circumstances, students can get a waiver from the financial aid office at the college which they are enrolled.  But a parent’s desire for a student to take care of their own college expenses is far from likely to merit a waiver from a financial aid officer.

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The FAFSA is the standardized financial information form used by all colleges and universities across the country.  For 2010, sweeping changes have come to the FAFSA form.  This 60 minute webinar will orient you to the FAFSA in its new form.  We will be covering:

• FAFSA on the web
• The PIN website
• Financial Aid Priority Deadlines
• The FAFSA worksheet
• EFC and how it impacts you

The webinar will be at 7pm (central time) on Wednesday, January 20th.  Register below.

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The 2010-2011 FAFSA Worksheet has been out for a while now.  You can get a PDF copy here. Frankly, it’s simplicity concerns me.  Let me explain.

For years, most colleges and universities have relied upon the FAFSA for the needed information to determine not only a student’s eligibility for federal financial aid sources, but the state’s, and the college’s own money as well.  The feds in their attempts to make the financial aid system simpler have stripped the FAFSA down to such little information that it will be useless for the colleges and states.  What families can expect to see in response to the stripped down FAFSA are far more complex institutional forms, more state forms, and more colleges being forced to subscribe to the CSS Profile.

What we are about to see is another great example of the law of unintended consequences.

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College Finances 101: Introduction to college funding and financial aid is now available for review.  This recording was made on the evening of December 8th, 2009 and covers the following:

• The college funding environment
• The college financial aid system
• Expected Family Contribution (EFC)
• FAFSA
• CSS Profile
• Financial Aid Priority Deadlines
• College Financial Track Records
• College Application Strategies
• College Financing
• Strategies and Tactics to Minimize College Costs and Increase College Financial Offers
• Negotiating the College Financial Award

This overview runs about 71 minutes. After you have finished watching, click the link below the video to request a PDF of the presentation be emailed to you.

Should you have any problems viewing the video, you may need to update your computer’s flash player.  You can do that at the Adobe website.

Webinar Response Form

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When is a student supposed to file their FAFSA and other financial aid forms?  This is a question families are asking all across the country right now.  Their admission applications are pretty well done.  Now it’s on to the financial paperwork… but hold on a minute.  Many parents and students are jumping the gun.

The CSS Profile has been available to file for the coming school year since October.  This gives families plenty of time to complete what is arguably the most complex of all financial aid forms.  Only about 350 colleges want the Profile filed, so the large majority of families have nothing to do with this form.  But you better be sure and double check with the schools to which you have applied to make certain you haven’t overlooked it.

The 2010-11 FAFSA will not be available until January 2010 however, and this creates some confusion.  In their zeal to get on top of all the details, many students and families have completed the already available 2009-10 FAFSA thinking they were completing the right paperwork for the next college year.  I hate to tell you this, but you just wasted a good chunk of time and energy on a form that is useless to you.

If you are one of the unfortunate students or families that were confused by the FAFSA forms, you will have to wait until January 2010 and redo the new FAFSA.  There is no way for the schools to hold over or transfer your information.  A new FAFSA must be completed.

The good news is you will be much better prepared to complete the FAFSA than your neighbors will.

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People often ask “what is the annual FAFSA or CSS Profile income limit that still allows my student to get college financial aid?”  This is a logical question, right?  The IRS uses all kinds of income limits for taxes.  Loan companies have income limits for borrowing money.  Colleges have grade point, ACT, or SAT limits for awarding money.  So what’s the income limit for getting college financial aid?

There is none.  There are no income limits for college financial aid.

College financial aid is a very complex calculation which utilizes student and parent income and assets, number of students in college, the cost of the college, amount of taxes paid, and a whole host of other information to determine what a student is eligible for.  There are no hard and fast rules that says one family will get $5,000, but the family making X number of dollars more will get nothing.  In fact, I have seen situations where a family with income around $70,000 per year received no financial help from a college, while a family making $200,000 received a pretty good chunk of money.  The money the student is awarded is dependent upon the unique factors of that student’s individual family.

Now there are some pieces of financial aid which have EFC (expected family contribution) limits attached to them such as Pell Grants, SEOG grants, and certain subsidized loans.  But EFC and income are not directly correlated.  There are also some individual colleges and universities which will have their own internal policies keyed to specific income levels, but these individual policies are not universal by any means.  For example, Harvard University will cover the total cost of college for student’s whose families make less than $60,000 per year.  But again, this is specific to Harvard.  Also, students whose families make more than $60,000 will be eligible for substantial amounts of financial help specific to their unique circumstances.

Do not get hung up on any kind of income limits.  Always complete the financial aid paperwork.  If you have heard about some income limit above which students don’t get any help, then your listening to useless rumor and inuendo.

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Next Webinar is…

Tuesday, December 8th, 2009 at 7pm Central Time

Register Below

College Finances 101 has now come to the web. Attendees have been praising this ground breaking presentation for years; now you can participate in the comfort of your own home or at work.

In 90 minutes, I will cover the most important aspects of minimizing your students’ costs for college. You will learn…

• How parents can often send their children to expensive private colleges for less money than a state school.
• How to fix lost money caused by popular college savings plans.
• How to identify schools that give you more free money.
• The great myths and misconceptions about college funding that can cost you thousands of dollars.
• What assets are penalized 4 times higher than others when applying for help.
• Why waiting one year can cost you as much as $5,000.

“The information Mr. Anderson shared was
incredibly eye opening.” — Tricia Christiansen, Guidance Counselor,
Hampton-Dumont HS, Hampton, Iowa

“What an eye opener! We wish we had
attended this seminar sooner. This seminar has given us ideas and
information but also hope…” — Dave & Maria Sullivan, Rock
Island, Illinois

“He has provided our families with
invaluable information. Scott does an excellent job…” — Linda
Cutler, Guidance Counselor, Rockridge High School, Taylor Ridge,
Illinois

“Listening to all the options available
to pay for college encouraged us that we don’t have to sacrifice a
quality education because of a lack of money.” Pastor Scott & Tonya
Culley, Silvis, Illinois

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Inheritances are not a common financial event, thankfully; but they sure can create some confusion for the FAFSA and CSS Profile processes.  Most parents and students assume that because money is received out of an inheritance it must be income.  This is not necessarily true.

First of all, you need to be aware that neither the FAFSA nor Profile mention inheritances as income.  There are those catch-all questions such as on the FAFSA which asks for all income not recorded else where on this form and includes the example of having bills paid on the student’s behalf.  There is however no further description of what that income might be.  If you search the FAFSA and government student aid websites, you will find no mention of inheritances except as a brief example of a student whose financial picture changed over the summer and then may not want to borrow as much money as before.  If you search the Profile realated websites, the only context of inheritance is regarding the valuation of inherited assets.

So in other words, the FAFSA and the Profile are silent regarding inheritances.  In such a case, the smart money is to rely upon the recognized authority in defining income.  This is typically the Internal Revenue Service (IRS).  The IRS does not define inheritances as income.

Then how do inheritances affect a student’s financail aid filings on the FAFSA or CSS Profile?  They affect the filings through the valuation of students’ and parents’ assets and the income generated from those specific assets while in the possession of the immediate family.  That income could be captial gains, dividends, or interest earned.

For example… A grandparent dies in June 2009 and leaves $250,000 to the parents in cash, and $15,000 in cash to the student.  This inheritance would not be reported in any income column on the FAFSA.  However, at the time of filing the FAFSA form in February 2010, the parent still has $200,000 of the inheritance and the student has $5,000 left of the inheritance.  These assets will be reported on the FAFSA form as savings or investments.  In addition, the parent’s $200,000 generated $1,000 in interest for half the year, and the student’s $5,000 did not generate any income.  The $1,000 in interest will be reported as interest income on the FAFSA.

Keep in mind, some colleges and universities may consider inheritances as income for their individual forms.  Double check those forms before assuming the guidelines above apply to institutional paperwork.

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Rental Property on the FAFSA has always been an area of contention in my mind.  The manner these assets are listed on the FAFSA can mean the difference of thousands of dollars in financial aid.   For the government to tell you what is and is not a business enterprise that is making money kind of frosts me.  The 2009-10 FAFSA Application and Verification Guide states the following…

At times a student or parent will claim rental property as a business.  Generally, it must be reported as real estate instead. A rental property would have to be part of a formally recognized business to be reported as such, and it usually would provide additional services like regular cleaning, linen, or maid service.

If at all possible, you want to claim real estate as a small business, and therefore qualify for the small business exemption on the FAFSA form.  Here are a few guidelines to follow which make claiming real estate as a business much easier.

1.  Organize under a separate legal entity – Don’t hold rental properties directly in your name and expect them to fly with a financial aid officer.  They should always be organized under a C-corp, S-corp, LLC, or similar entity.  This is by far the most important qualification to be considered a business asset.

2.  The more activity the better – If you just have one piece of property that you rent out, or if you have a vacation cottage on a lake that maybe you rent once or twice during a season; don’t expect that to be considered a business asset.  The more activity you have in real estate the better.  You need to be able to demonstrate substantial levels of material participation and activity.  If you have multiple properties and active participation in managing them, it will strengthen your case.  This is one area where going big and acquiring more assets will help you.

3.  Show associated activity – The following activities showing in your corporation may also indicate more business activity, rather than just rentals:

• Develops or redevelops
• Constructs or reconstructs
• Acquires
• Converts
• Operates or Manages
• Brokers
• Other business activity associated with the property

4.  Other activities – There are other signs or activities which will add weight to listing real estate as a business operation:

• Registering for appropriate state and local permits
• An employer identification number (EIN)
• Fictitious name registration or DBA for the business
• Separate business checking account

These four guidelines will definitely strengthen your hand in getting that small business exclusion on the FAFSA form.  But it is not a black and white standard.  Some schools will let you keep the exclusion, others will not.  My recommendation is when in doubt, list the property as a business.  Make the school take the initiative to prove it otherwise.

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