If your student will soon be headed off to college, filling out the FAFSA may be a rite of passage for their senior year. But, navigating the student financial aid maze can be tricky, even with the help of a college financial aid advisor.
As a parent, having a student financial aid checklist can make the task of helping your child easier.
Student Financial Aid Checklist for Parents
There's a lot of ground to cover when it comes to discussing financial aid with your soon-to-be college freshman. These are the most important steps to tackle during your student's final year of high school.
Beginning October 1, your senior will be eligible to complete the Free Application for Federal Student Aid. But before that date, you should be organizing key financial documents so there are no snags when it's time to apply. You'll need your federal income tax returns, bank and investment statements, records of any untaxed income, and statements for 529 or other tax-advantaged college savings accounts.
Review 529 Plan Balances
Saving money in a 529 account can offer tax advantages for parents but it can potentially impact financial aid eligibility. Typically, 529 plans are considered a parental asset on the FAFSA. Up to the first $10,500 in assets, depending on parents' ages, won't have an impact, but assets over that amount can reduce your student's financial aid by up to 5.64% of the assets' value on a sliding scale, under the 2021–2022 EFC formula. For example, parents aged 48 can protect their first $6,600 in assets. If they had $50,000 in a 529 plan, their financial aid could be reduced by $2,448 ($50,000 - $6,600 = $43,400 * 5.64%).
Estimate Your Expected Family Contribution (EFC)
Ahead of filling out the FAFSA, you should be thinking about your Expected Family Contribution or EFC. This is the amount you're expected to contribute to your child's education. You can calculate your estimated contribution using an EFC calculator. This number can change once the FAFSA is completed and approved, but establishing a baseline early on can be helpful in planning your college expense budget.
Beginning with the 2023-2024 school year, the FAFSA will be simplified, and the Expected Family Contribution will be renamed the “Student Aid Index” (SAI). The SAI will determine a student's eligibility for most types of financial aid, except Pell Grant minimums and maximums.
Discuss Federal Loan Alternatives
In addition to applying for federal loans, you should be talking over scholarship and grant options with your high school senior. Encourage them to apply for these as early as possible in their senior year. Additionally, you may want to consider options for private student loans in the event that federal loans, scholarships, and grants aren't enough to cover their cost of attendance.
Weigh the Benefits of Work-Study
Filling out the FAFSA may make your student eligible for federal work-study, in addition to federal loans or grants. This could be a more appealing option to them than working part- or full-time while they're in school. Crunch the numbers on how much aid they could receive through work-study versus working off-campus to see which one makes more sense financially.
Review the EFC on Your Student Aid Report (SAR)
Once your student's FAFSA has been processed, they'll receive a Student Aid Report. This report details their eligibility for aid and it also includes your EFC. Compare this number to the EFC you estimated earlier to see how closely they align.
Compare the Competing Financial Aid Offers
Your student may have a dream school in mind but if you're relying on financial aid to pay their some (or all) of their way, the amount of aid being offered matters. If they've been accepted at several different schools and offered financial aid by each one, take time to review the packages individually. It may be a smarter move financially for them to attend a school that offers a better aid package, even if it's not at the top of their list.
Carefully Consider Taking out PLUS Loans
Federal PLUS loans are designed to help parents pay for the cost of their child's undergraduate education. However, you need to consider the implications of taking on PLUS loans first. If you're trying to pay down other debt of your own or save for retirement, an additional monthly loan payment could make those goals harder to reach.
Connect With the Financial Aid Office
Once your student decides on a college or university, reach out directly to the school's financial aid office. The financial aid office can give you information about additional types of financial aid that you may want to apply for and help you finalize loan paperwork.
Pay the Initial Deposit
Generally, you're required to pay some type of deposit to hold your student's spot ahead of the beginning of the fall semester or reserve a preferred spot in student housing. This deposit is typically a few hundred dollars and it may be non-refundable, depending on the school your senior will soon be heading off to. If you're not sure about the deposit amount or how to pay it, the financial aid office can help.
Make Your Student Financial Aid Checklist and Check It Twice
Financial aid isn't something you can afford to get wrong and overlooking even a small thing could cost you. An error on the FAFSA, for example, could result in a much higher Expected Family Contribution, so it pays to review it carefully before submitting it and after it's approved to ensure that all your information is correct. Remember also to take time to talk to your students before they start school to help them understand their options for repaying their loans and how to budget for their monthly payments after graduation.