In the dead of winter during some of the shortest days of the year, parents of high school seniors and current college students have to endure the drudgery of completing financial aid forms. If you think a body scan or a pat down check at an airport makes you feel violated, the federal government with their FAFSA and the many private schools with their CSS PROFILE, will scrutinize you in an impersonal manner even more. For the many hours you will put into revealing your personal finances, chances are for most families, you will be told there is no significant assistance coming your way to help pay those whopping college bills.
Here’s an overview on each form. The FAFSA is the federal form which will determine eligibility for any federal grants (free money) and subsidized interest on certain federal loans. The result of completing it yields an EFC (Expected Family Contribution) which is the amount the government feels you “should” be able to pay that year towards your son or daughter’s education. Most parents laugh at the dollar amount stated in the EFC until they cry. The FAFSA is also the form parents must complete to be eligible to apply for any type of Federal Loan including Direct Stafford Loans (which can be subsidized and unsubsidized based on income level) as well as Direct PLUS Loans. The Stafford Loans, which are in the student’s name only, have annual dollar limits of $5500-$7500 based on the student’s year of college. Direct Plus Loans are intended for parents and the amounts are more flexible. Parents may borrow up to the cost of attendance at a college minus any other financial aid that has been given. Unsubsidized Direct Stafford Loans are currently at a fixed rate of 6.8% (subsidized 3.4%) while Direct Plus Loans are presently at 7.9%.
The PROFILE is a form developed by the College Scholarship Service and used primarily by several hundred private colleges. It digs deeper into your finances inquiring about such items as home equity, non-custodial parent finances and business value. They even charge you to register to complete it and then charge you again every time you send the results to a college. As if that’s not bad enough, in most cases the results indicate that parents should be able to contribute more to their child’s education than even the FAFSA indicated. Isn’t being part of the middle class such a joy?
Okay this process is painful but here are a few overall suggestions in this area of financial aid. First, fill out the forms as early as possible after Jan 1 (read now). If your tax return is not completed, then just estimate as best you can to get them submitted. You can always notify of changes later. Grant money from individual colleges can also dry up so in some cases it is “first come first serve”. Second, if borrowing is needed, always take the Direct Stafford Loans first over anything else. These loans are for students, not requiring a co-signor and taking them over private loans makes students eligible for the recently introduced “income based repayment plans” after they hopefully graduate. Lastly, consider home equity loans or lines of credit (assuming you have some equity in your home). With interest rates at their lowest in decades, these loans with their tax advantages may be a better option than PLUS or private loans.
Being financially probed and scanned through the completion of these forms for often very little benefit is not enjoyable, but potentially missing out on assistance you may be eligible for would be a tragedy. So similarly to going through airport security, just let them check you out while trying to keep your mind on your destination.