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How Financial Aid Really Works and How You Can Get More of It

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By: Gen and Kelly Tanabe
Founders of SuperCollege and authors of 13 books on college planning.

Gen and Kelly Tanabe can answer your question in Expert Advice.




Time your stock sales.

When you sell a stock can have an impact on your financial aid. Let's say you have a stock that has appreciated by $10,000. If you sell the stock after January 1 of the student's junior year in high school or in the same year that the student will be starting college, the earnings are considered income. For parents it could be assessed at up to 47 percent and for students up to 50 percent. From the $10,000 gain, as much as $4,700 (parents) or $5,000 (students) may be plugged into the financial aid formula as potential income that could be applied to college costs.

But let's say that you sell the stock before January 1 of the student's junior year or in the calendar year before the student starts school. The proceeds will not be counted as income but will show up as an asset. As a parental asset, this money can only be assessed at up to 5.65 percent, which means only $565 is considered as available funds to pay for college. Even for students, the asset assessment rate is 20 percent, which is better than the income assessment rate of 50 percent.




Declare your independence, if you qualify.

In college, there are no curfews or parents telling kids what to do. So why shouldn't students declare themselves independent? Many students mistakenly believe that if they declare their independence from their parents, they will get more financial aid. Unfortunately, declaring independence for the purposes of financial aid is based on very strict guidelines. In most cases, you are considered dependent on your parents for support and their income and assets will be considered when determining your financial need. Under certain circumstances, you can be evaluated independently of your parents, and only you and your spouse's (if you have one) income and assets will be taken into account. You're considered independent if one of the following is true:

  • You are 24 years or older by December 31 of the current year.

  • You're married.

  • You're enrolled in a graduate or professional degree program.

  • You have legal dependents other than a spouse.

  • You're an orphan or ward of the court.

  • You're a veteran of the U.S. Armed Forces.
Your parents may not support you at all; but according to the guidelines, you are still considered a dependent. However, if you truly are independent from your parents but don't meet the above qualifications, it is vitally important that you include a detailed letter explaining your situation to the college financial aid office. You may be asked to provide additional proof, but the college financial aid officer does have the power to declare a student independent based on his or her own professional judgment.




Don't miss the deadlines.

The deadlines for turning in your financial aid applications vary by college, but you want to turn in the FAFSA as soon as possible after January 1st of your child's senior year in high school. Why the rush? The reason is that colleges have a limited amount of financial aid.

Most colleges use what is known as a "priority" deadline. While the deadline varies by school, it is usually in February or March. This date represents the approximate time that the school expects to run out of money. If you get your application turned in by this deadline, you should be fine. However, if your application arrives late, or if it is incomplete and the time it will take to provide more information pushes you past this deadline, then you may not receive the financial aid you deserve simply because the college will run out of money.




Final Thoughts ...

The biggest mistake that most families make when it comes to financial aid is that they assume they won't qualify and therefore don't take the effort to apply. But you'll never know what you truly deserve unless you apply. You could find that even if you don't get a grant, you might be awarded a cushy campus job, special college scholarship or a low-interest student loan. One of these sources of money may be just what you need to make paying for college possible.

No one can predict the future. Today your parents may have a great job, but next year they may be laid off. Or perhaps an elderly grandparent may need to live with your family. The future is uncertain, which means if something should happen to your family's finances during the year, you will want to be able to approach the financial aid office to ask for some help. Your best chance of getting help will depend on whether or not you have applied for financial aid. Without having an FAFSA on record, the college has no idea how much of an impact your family has sustained. It makes it much easier for a financial aid officer to give you more money if you have already filled out the FAFSA regardless of whether or not you were given any aid. So think of applying for aid as added insurance against any unexpected changes in your family's future financial situation.

The bottom line is that it's dangerous to second-guess the financial aid office. Applying is free and won't take that much time. And most importantly, the rewards for making the effort can be well worth it.




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