Mind on Money: FAFSA is cumbersome, but necessary

Mind on Money: FAFSA is cumbersome, but necessary

November is here and for those students who submitted early applications for college admissions, the acceptance letters are starting to arrive in the mail. Having been through this process before, I know it is an exciting time for students and families and we are awaiting hopefully some of these letters in my home right now as well.

While the excitement of the college acceptance letter still hangs in the house, comes the secondary realization that someone is going to have to pay for this exciting new educational opportunity. Which starts the family down a new and sometimes confusing path called the FAFSA.

FAFSA stands for Free Application for Federal Student Aid, and it is the standardized process used to determine eligibility for federal financial aid, student loans and by most colleges and universities when making both needs-based and sometimes merit-based financial aid decisions.

I’ve already received a number of questions in the past few weeks from parents questioning whether or not they should complete the somewhat cumbersome FAFSA process.

The answer I give universally is, regardless of the family’s income or net worth, even if they do not believe they will receive needs-based financial aid, yes, they should complete the FAFSA for all first-year college students. As mentioned above, most schools will refer to the FAFSA when making financial aid and scholarship decisions and are very likely to request the FAFSA as part of the aid consideration process. With this in mind, we might as well roll up our sleeves and get the process done, so here are some tips.

First, yes, I know this is supposed to be a student-completed process, but let’s be realistic here. As the Dad of a high school senior, I know the probability of him completing the FAFSA in a timely or accurate manner is pretty much zilch. Furthermore, there are parent-based financials on the FAFSA I would just as soon he not be exposed to, so consider this as a parent-driven and parent-completed process in most situations.

Second, the FAFSA asks for information regarding financial accounts and income. The system now interfaces directly with the IRS for tax records, and if it functions properly for you then congratulations, you’re lucky. Just in case it doesn’t, I suggest parents have their tax returns for the past two years available, along with account statements for all relevant accounts before they start the process.

So, step one before even opening the studentaid.gov website to begin the process is to assemble all parent bank account, investment account, business account, 529 account, student bank account, student UTMA account statements or records. With online account access widely available, I suggest logging onto accounts and printing the most current balances, as the FAFSA asks for values at the time the process is being completed. You will also want to have the parent as well as the student’s driver’s license on hand. As I mentioned, have this stack assembled before the process is started; it’ll make it go much faster.

Third, I find the FAFSA interface overly focused on security to the point of being maddening. Even a slight pause in the process causes the system to log out, requiring user names, student Social Security number, FSA code, and a PIN to log back in. Lose one of these or lock yourself out and it delays the process considerably. I suggest writing down all the log-in information clearly and taping it to the wall next to the computer being used to complete the process. Of course, once the process is complete, store the login information somewhere secure, but it needs to be quickly accessible while working in the system.

Finally, in split-parenting families the question often arises which parent information should be reported on the form. The rule is if the student lived predominantly with one parent during the year then the FAFSA should be filled out for that parent. If parenting time was split evenly and one parent intends to provide more support for school, then the FAFSA wants that parent. In the first situation, if the student lived predominantly with one parent, and that parent will provide most educational support, if the parent has remarried the stepparents’ financials should be included.

Good Luck.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.