How to Avoid Expensive Financial Aid Mistakes
Kim Clark

 

Easier FAFSA Inspires Hope for More College Aid: Experts offer advice on how to avoid expensive financial aid mistakes

Procrastination and tricky financial aid rules have been costing millions of college students big bucks. But new efforts to make the Free Application for Federal Student Aid easier may enable more students to qualify for more money.

About half of all students who file a FAFSA miss their state's deadline and thus lose out on opportunities for extra grants, one study has found. And another recent study found that students who sought free professional help filling out their FAFSAs got 30 percent more aid than those not offered advice and assistance.

Students who haven't filed their applications by March 1 have already missed deadlines in at least nine states. But aid officials urge those who've waited until now to buckle down and fill out the form soon. The federal government is still accepting applications for its grants and loans. And students lucky enough to live in the two dozen states with later deadlines still have a chance of getting maximum aid. A few of the soon approaching deadlines: Indiana's deadline is March 10. Kentucky and North Dakota's cutoff date is March 15. Mississippi's is March 31. About 20 other states have deadlines April 1 and later.

In addition, one of the biggest reasons for procrastination, the difficulty of the form, has been reduced this year. The most recent electronic version of the FAFSA has eliminated several redundant questions. And in some cases, the FAFSA is allowing those who've filed their taxes to click a button and have their relevant tax information automatically entered into their FAFSA--saving a lot of time and energy.

"The FAFSA uses some tax lingo that is not user-friendly," says Amanda Weick, an H&R Block tax preparer in Maple Heights, Ohio, who helped with a study to see the impact that free FAFSA help, provided to a sampling of families who happened to go to H&R Block to get their taxes prepared, would have on students. Students who got their FAFSAs started while completing their tax forms were 33 percent more likely to receive federal grants. In many cases, the students had assumed they wouldn't receive anything, Weick said. "We were able to say to them: 'Based on your tax return, you may be eligible for this amount of money.' And you could see the wheels turning in their mind," Weick said.

The H&R Block study is now over, but the Department of Education is trying to spread the help to all American students by getting the Internal Revenue Service to transfer its tax data directly into FAFSAs. So far, only those who filed a tax form in 2008 and are still working on a FAFSA for the current academic year can use the automatic option. The Department of Education says it hopes to have the automatic tax fill-in option up and running for the 2010-11 FAFSA by this summer.

Still, even those who have their tax questions automatically filled in can get tripped up by other arcane rules and gotchas. Simple mistakes such as not using a full formal name can cause big headaches, for example.

[Video: Common Mistakes on the FAFSA]

Failing to read the fine print can also result in expensive errors. The FAFSA states that the values of some assets, such as homes or retirement accounts, shouldn't be included, but some parents mistakenly add those in and thus reduce their eligibility for aid, says Al Hoffman, a private aid counselor in New London, Conn.

Likewise, he says he often has to deliver bad news to stepparents who mistakenly believe that prenuptial agreements absolve them of financial responsibility for stepchildren's tuition.

The FAFSA also doesn't give any advice on how to structure family finances to increase availability for aid, such as using savings to pay down bills or debts, or moving a student's college savings into a 529 college savings account, Hoffman notes.

 

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Education: How to Avoid Expensive Financial Aid Mistakes | Kim Clark

 

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