FAFSA and Parental College Contribution

Parents: How well do you know College Finance?

What is FAFSA?

FAFSA (Free Application for Federal Student Aid) is a "universal" Federal Government ANNUAL application required for students to get almost any financial aid for college.  It doesn't just cover government grants or scholarships.  It is usually required for any campus "work-study" programs or on-campus jobs.

Parents, please note: You are NOT LEGALLY REQUIRED to submit information, regardless of "suggestions" by your child's high school counselors.  In my 34 years of teaching, did I ever hear parents assume they were legally required?  Oh, yes, many times.  When cornered, counselors carefully covered their tracks by saying the information is required for student's financial aid.  But at Parent FAFSA "Workshops," the implication and presumption is you'll do whatever they say is necessary for your child's college, of course.

Critiques of FAFSA

Many experts have criticized the FAFSA form and process as cumbersome, lengthy, and time-consuming.  Even the American Association of Collegiate Registrars and Admissions Officers have criticized FAFSA, which does not consider fluctuations of family finances, or parental willingness to contribute.  It also discounts any Housing- and Food-Insecurity of college students. (see Miscalculating Need: How the Free Application for Federal Student Aid Misses the Mark)   

The FAFSA Process

The FAFSA process is exhaustive.  The student fills out their information, either online or by form.  You, the parent, divulge all of your private financial information. The application is the Student's -- not yours.  You don't "control" it, nor is it "private."  Your child will see all submitted parental financial information. 

The FAFSA forms are submitted (along with copies of the Parent's most recent IRS 1040s).  After processing, the student receives the Student Aid Report (SAR) which lists all information from the application; and indicates whether the application is complete. If complete, the SAR notifies the student of the Expected Family Contribution (EFC; for parental financial information, see section below).  Presumably, that's when Junior asks you to pony up that check.

Who is Considered a "Parent"
Which parent is "expected" to file confidential financial information?
1. If Parents are currently married: The parent's combined household finances are reported.
2. If Parents are Divorced: Only one parent is considered a parent for FAFSA purposes.

• If the parents are divorced, separated, or were never married, and don't live together, the student fills out the FAFSA based on the custodial parent (the parent who has the child more than 50% of the time).
• If the student lives with both parents equally, the FAFSA is based on the parent who gave more financial support in the previous year.
• If the custodial parent remarries, the income of the step-parent must be reported.
• Alimony is considered taxable income ONLY if the custodial parent is receiving it. (The non-custodial parent doesn't get a "break" for paying it!)

Some students are "coached" to live with the parent who earns less, in the case of divorced, separated, or unmarried parents.  If the student's custodial parent makes less money, the EFC will be lower and the financial aid package could be higher!

Divorce Privacy Concern:
Your child will see all submitted parental financial information.  They are in a position to disclose everything to your Ex-spouse.  It doesn't mean they will, but they could; especially if the Ex regularly "pumps" the child for information about you and your personal business.

Have I heard from parents not willing to leak their finances to their Exs?  Yes, I have.  Reasons have included: general privacy concerns; Ex-spouse abuse and manipulation; and not wanting to trigger increases in support.

EFC: Expected Family Contribution
Expected Family Contribution is a number that determines students’ eligibility for certain types of federal student aid.  The parent is NOT required to pay that amount.  It's simply the government's opinion of your parental ability to pay.  The Parent always remains in control of how much they feel they are able to pay, and under what "terms and conditions."  The important thing the parent loses is PRIVACY.

The Parent's Financial Information

What information must the parent provide for the Application?  The parent submits information on all financial assets.  

First and foremost is Taxable and Untaxed Income.  This is where your cash "contribution" toward college would come from, right?

Wrong!  

FAFSA also wants parents to contribute from their ASSETS, even if not in the form of cash!  

Let's take a look at the form for Parent Net Worth, line by line:
16. Cash, savings, and checking (they want your CASH, of course!)
17. Net worth of investments (Retirement, etc. Does NOT include your primary residence, luckily)
18. Net worth of business and/or investment farm (starts at 40% of net worth of business/farm up to $130k, and increases from there. Do they want you to liquidate part of your business?)
19. Adjustment of net worth of business/farm (they expect you to pay more as your business net worth increases)
20. Net worth (sum of lines)
21. Education savings and asset protection allowance (a small deduction. The Allowance varies by age of older parent. At age 45: $11,100 (2 parents); $5,800 (1). At age 65 +: $18,900 (2); or $9,500 (1).)
22. Discretionary net worth (Discretionary?  Not really -- they expect you to give it to a college!)

Luckily, FAFSA does consider the number of dependents currently in college during the application school year.  It excludes younger children that might also need your contribution soon. But it also excludes you, the parent, who may also have educational needs!

Are the disclosures invasive?  You bet, and they continue EVERY year until the student turns 24, or are otherwise considered "Independent."  (Independent means the student is: homeless, emancipated, married, a Military Veteran, a graduate student, etc.)

_____________________

Call to Action

First, your child needs to have realistic career ideas. Then determine if college is required.
College is an expensive way to find out they:

• Didn't need the degree
• Couldn't finish the degree (with lots of debt; or less retirement for you -- or both)
• Can't find a job in their major (wasted degree?)
• Hate the career resulting from the degree
• Can't succeed because they lack skills or aptitudes not teachable by "classes."

Each of the above "stages" has probabilities, not guarantees! Many high school graduates fail in one of those five critical areas.

Do you want to gamble years of paying their college tuition for a poor career bet?   
Outsmart College and the Contribution Project will provide the answers!
Stay tuned for the next post.
Visit my companion website, Outsmart College (https://sites.google.com/view/outsmart-college/)
__________

If you are interested in REAL career prep for your child, contact me NOW!