Applying to college is an exciting time in any student's life, but it can also be a rite of passage financially. For many students, completing the Free Application for Student Financial Aid (FAFSA) form is the first time they've had to consider themselves and their circumstances from a financial point of view. Given how important financial aid is to making college education affordable for many families, the FAFSA is definitely something you'll want to take seriously.
Completing the FAFSA
Your first inclination may be to give the FAFSA to your parents and let them take care of it. While you'll probably need some information and help from them, you'll better understand how your financial aid is determined if you work on parts of the form yourself.
One crucial part of the FAFSA involves determining whether or not you'll be considered a dependent of your parents. As you'll see later on, your parents' financial situation can have a huge impact on your financial aid if you're treated as their dependent. If you're a dependent, then you'll have to provide financial information not only for yourself but also for your parents. In general, students who are 23 or older, in graduate school, are married, or have children are considered to be independent. Also, if you currently serve or have previously served in the military, or if both of your parents are deceased, then you'll be able to file the FAFSA as an independent student.
The financial part of the FAFSA is where you may need to ask for help from your parents. The main problem with the FAFSA process is its timing. The form asks students and their parents to provide numbers from their 2006 tax returns. However, although the form is made available each January, and many schools and financial experts recommend completing the form as soon as possible, most people don't have their tax returns completed that early. As a result, while the form appears to ask extremely simple questions that just require you to copy numbers from tax forms, the sad reality is that you often won't yet have access to those figures, especially if you're trying to get the FAFSA in early.
Still, it's likely that you'll be able to complete the student portion without too much difficulty. If you don't work and don't have investments in your own name, then you may not even have to file a tax return, and so many of the numbers the form asks for won't be relevant. Adding up any earnings you made from working is as easy as looking at an old pay stub or at your W-2 (the tax form you received at the end of January). If, on the other hand, you do have earnings and investments of your own, then it may make sense to get your taxes done early so you can copy the appropriate figures without having to make wild guesses to estimate them.
Be sure to check with your parents about assets and investments, since they may have financial accounts set up in your name; in that case you'll have to include them along with any accounts that you have access to. For the most part, however, it's likely that the bulk of the money that your parents have set aside for your college education will be included with their financial information instead of yours.
Money and your parents
Your parents will probably do most of the heavy lifting when it comes to the FAFSA. They'll need to provide more detailed information from their tax returns, which are probably much more complicated than yours. They'll also need to tally up their total assets, excluding certain items like the value of your family home. In many ways, the FAFSA intrudes more into personal financial matters than into tax returns; to determine financial aid, schools need to know not only about income, but also about any financial resources that could possibly contribute to your education.
Like most government forms, the FAFSA may seem intimidating at first. However, it's merely a tool for getting the financial aid that you need. The second part of this article discusses how schools use the form to deteremine your financial aid package, as well as things you and your parents can do to improve your chances for a larger amount.
The Fool offers a number of resources for saving for college. Check out the College Savings Center for general information. Also, Foolish expert Robert Brokamp has written an excellent book on the subject, The Motley Fool's Guide to Paying for School, which provides more in-depth advice about covering educational expenses.
Fool contributor Dan Caplinger has a while yet before he has to worry about his 2-year-old's college expenses, but he's already got a 529 plan started. He doesn't own shares of any of the companies mentioned in this article. The Fool's disclosure policy is always a learning experience.