10 tips for getting federal student aid

It's financial aid season, which means millions of families will be grappling with the FAFSA in the next few weeks.

Chances are most families are going to make mistakes when completing the Free Application for Federal Student Aid. These mistakes can be costly, and may even keep you from receiving the financial assistance for which you qualify.

Here are 10 tips to help you successfully complete the FAFSA:

1. Don't provide retirement assets

Families can dramatically hurt their chances for financial aid if they include assets from their 401(k) plans, Individual Retirement Accounts, 403(b) and other qualified retirement accounts on the FAFSA. The financial aid form only requires that you share non-retirement assets.

2. Don't include business assets

Parents who have a family-owned and controlled small business do not have to report the company's net worth on the FAFSA if it has fewer than 100 full-time employees.

3. Skipping deadlines

Colleges impose deadlines on families to submit their financial aid forms, and these dates can be much earlier for students applying through early decision and early action options. Find out what the deadlines are, and don't miss them.

4. File early

Although there are essentially no federal deadlines for seeking financial aid, states do impose deadlines for families who hope to qualify for financial aid through their state programs. State deadlines can be as early as February. In some states, aid is given out on a first-come, first-served basis, so it's best to file your FAFSA well ahead of the state deadline.

5. Seek help

Confused? FAFSA staffers can help. You can contact the Federal Student Aid Information Center via online chat, phone or email. Here's where to find the financial aid contact information.

6. List the most current marital status

You need to provide your marital status -- divorced, separated or married -- on the day that the FAFSA is filed. Separated and divorced parents will sometimes enjoy a financial aid advantage.

7. Have the right parent complete the FAFSA

In families of divorce, the parent who has taken care of the child during the majority of the 12 months dating from the day the FAFSA is submitted is considered the custodial parent. This can be especially advantageous in families when one ex-spouse earns significantly less than the other. Ideally, the child would live with the lower-earning parent for at least six months and a day. This parent would complete the FAFSA, and the other parent's income would not be included. If the custodial parent remarries, however, the income from the new spouse would also be included on the FAFSA.

8. Avoid blank answers

If the answer to a question is zero or not applicable, write "0" or "Not Applicable" on the online form. Leaving blank answers can cause miscalculations.

9. Pay attention to graduation rates

When you complete the FAFSA and designate that the application be sent to specific schools, the FAFSA website will provide you with the graduation rates of each school on your list. Try to avoid schools with low graduation rates.

10. Don't inflate your education

Plenty of schools will give applicants brownie points if they are considered first-generation college students. If parents didn't graduate from college, select "high school" as the highest education attainment.

Bottom Line: Following these tips can help you increase your financial aid award, and every dollar counts.

[mnolanryan]

I have been reading that parents do not have to report a small family-owned business' assets on the fafsa if the business has less than 100 employees. Would this include assets that are owned by one parent along with his siblings which are in a limited partnership?

[Hurdlr62]

Work in Financial Aid and review FAFSAs on a weekly, even daily basis. In addition, a very helpful resource provided by the US Department of Education is "The Detailed Instructions for Completing the 2012-13 FAFSA." This resource provides a lot of information and will give guidance when a student or the parent are confused a question. You can access this resource online at http://studentaid.ed.gov/students/publications/completing_fafsa/index.html -- Make sure you select the correct year when completing the FAFSA or when looking at this online resource. The FAFSA is currently available for both the Current 2011-12 year (in progress) and the upcoming 2012-13 year.

Also, from my 6 years of working with students and their parents on the FAFSA process, other common errors not covered in Lynn's excellent article are: 1. Missing Signatures -- either the student or the parent or both fail to sign the online FAFSA using their distinct PIN (Personal Identification Number); 2. Data entry errors (incorrect entry of Social Security Number, mispelling of name, reporting 500,000 for saving instead of the intended 50,000, etc.); 3. Using nickname instead of legal name as it appears on your Social Security Card (students and parents) -- this is a problem when obtaining a PIN, completing the FAFSA, and with other financial aid processes; 4. Incorrect claims to Independent Student status. All of these errors and others cause unnecessary delays in processing financial aid awards. Advice - have all your information gathered, take your time, double-check your data entry on each page (especially name, date of birth, Soc Sec Number, and financial numbers), and have "The Detailed Instructions for Completing the FAFSA" open in another window.

Finally, in Dependent Student situations, both the student and at least on parent need to have their own distinct PIN to use as their electronic signature before submitting the FAFSA. You can obtain these PINs as part of the actual FAFSA process, or you can go to www.pin.ed.gov prior to completing the FAFSA to apply for a PIN. Again, when getting your PIN use your legal name.

I hope this aids you in completing the FAFSA successfully!

[MaryFallon]

To Lynn's excellent advice, I remind students and parents that just like with income taxes, the federal government allows students options when preparing a FAFSA - either doing it themselves on the U.S. Department of Education's Web site for free or getting help from a fee-based FAFSA preparation service for expert assistance and advice about how to complete the form quickly and accurately.

Not All Assets Count. A primary residence, retirement plans, small family-owned businesses, and the cash value of life insurance don't count as assets on the FAFSA. Some of the most common and costly mistakes are made by incorrectly reporting assets.

Dependency Surprises. Just because a student financially supports themselves, doesn't mean they are independent under FAFSA rules. Many students are considered dependent until age 24 requiring parents' income on their FAFSA. However, for children of divorced parents only the income of the parent with whom the child lived with the most during the past 12 months is counted.

Job Loss Relief. If a member of a household has had their job eliminated, a student may be eligible for more aid. Look for the 'dislocated worker' question and see if the family meets one of the four criteria. Dislocated workers' assets are counted differently than others - typically helping reduce an EFC, which increases aid eligibility.

Military Aid. Veterans and service members receiving military aid such as Post 9/11 GI Bill benefits are eligible for all federal, state and institutional aid programs without penalty. Military aid awards do not reduce the amount of aid they can receive from other aid programs.

Professional Help. While most high school counselors don't have time or in-depth FAFSA knowledge to assist students, some communities host FAFSA-preparation events each winter like College GoalSunday. College financial aid officials may provide guidance to their students. Help from fee-based FAFSA preparation services is allowed, too. Some experts, such as Student Financial Aid Services, provide free or discounted services to low-income students and provide assistance in multiple languages.