The Most Common Financial Aid Questions

 In General

Financial Aid:

The Eleven Most Common Questions

Financial aid season is a few weeks away, and we’ve handled many questions about the subject over last ten years. To make things easy, we have included a free reference guide for completing the FAFSA and our eleven most frequently-asked questions about financial aid:

I make too much money to qualify for aid. Should I apply for aid regardless?

Always! Most families think they don’t qualify for financial aid and prevent themselves from receiving it by merely failing to apply. There are also a few sources of other assistance that could help a family fill a funding gap, such as unsubsidized Stafford and PLUS loans, which are available regardless of need. Some schools require it to be eligible for certain other types of scholarships. Since the Federal Student Aid (FAFSA) is free, there is no excuse for not applying.

Do I need to be admitted to a particular university before I apply for Aid?

No; you can apply for financial aid any time after October 1st. To receive any funds, however, you must be admitted and enrolled at a college or university.

Should I reposition my assets to get more financial aid?

It depends on a family’s expected family contribution (EFC), but most importantly, the school selection will drive your financial aid strategies (lowering your EFC).  Many families can reduce their EFC, but it doesn’t matter since their school selection does not warrant a financial aid reduction strategy.  If you are looking into this type of strategy, you must know how a school awards aid and how much of it is will consist of grants and scholarships (FREE MONEY) verse loans/work study.

Do I need to reapply for financial aid every year?

Yes, most financial aid offices require that you apply for financial aid every year. If your financial circumstances change, then you may receive more or less aid. You will receive a “Renewal Application” after the first year of filing that contains information from the previous year’s FAFSA. Note that if your situation changes, your eligibility for financial aid may vary significantly, especially if you have more or fewer family members in college. Renewal of many financial aid packages depends on earning a specific number of credits or achieving a certain GPA.

How do I apply for a Pell Grant and other types of federal need-based aid?

You must submit a FAFSA application form. To indicate interest in student employment, student loans, and parent loans, you should check the appropriate boxes on the FAFSA. Checking these boxes does not commit you to accept these types of aid, as you will have the opportunity to accept or decline each part of your aid package later, but leaving these boxes unchecked will not increase the number of grants you receive.

Are my parents responsible for all of my educational loans?

Only Federal Parent PLUS loans. Parents will be responsible for other loans if they co-sign on a loan and you are under 18. In general, students should be responsible for repaying their educational loans. If your parents or grandparents want to help pay off your loan or if your loan provider provides an electronic payment service your parents can agree to have the payments deducted from their account.

Why is the expected family contribution listed on the Student Aid Report (SAR) different from the family contribution expected by the college?

The federal formula for computing the expected family contribution is different from the formulas used by many universities. In particular, the federal formula does not consider home equity as part of the assets, while many private colleges do consider home equity for their institutional funds.

Do I need to begin repaying my loans if I take a leave of absence?

No, not immediately. The direct federal loan has a grace period of 6 months, and the Perkins loan has a grace period of 9 months before the student must begin repaying the loan. When you take a leave of absence, you will not need to repay your loan until the grace period is over; if you use up the grace-period before you graduate, you’ll need to begin repaying your loan immediately after you graduate. It is possible to request an extension to the grace period, but this must be done before the grace period ends. If your grace-period runs out in the middle of your leave of absence, you’ll need to start making payments on your student loans.

I received an outside scholarship. Should I report it to the financial aid office?

Yes. If you are receiving any financial aid from university or government sources, you must report the scholarship to the financial aid office. Unfortunately, the university will adjust your financial aid package to compensate. Nevertheless, the outside scholarship will have some benefits; at some universities, outside scholarships are used to reduce the student loan level.

Are work-study earnings taxable?

Yes, the money earned from Federal Work-Study is generally subject to federal and state income tax, but exempt from FICA taxes (provided you are enrolled full-time and work less than half-time). The student should be careful to report amounts based on the calendar year and not the school year.

Why would I take a Direct Federal Loan if I can pay the entire college bill?

Guardrails, financial education, and accountability!  The direct federal loan will be the only loan in the students name solely making it a great tool to use as leverage to make sure your student achieves the families agreed upon college objectives, hopefully graduating in 4 years.

Think about it; colleges don’t give you a contract promising to get your student to study, get them to class and be responsible with your money.  With this loan, your student now has “skin in the game,” and it will be possibly one of your last teaching moments about money with your student.

The financial aid and college admissions can be both confusing and complicated.   Download your free reference guide for completing the FAFSA to make it a little easier.

If you need the assistance of an experienced college financial planner to develop a college funding game plan for your family, please schedule a free 30-minute strategy call with me.

 

Stuart Canzeri
Stuart is known as one on the industry experts in college funding and college financial planning. He serves as a registered fiduciary for his clients and has been in the financial and college planning arena for a combined 18 years. Stuart received a Bachelor of Arts in Communications from Tulane University, a MBA from Mercer University and completed his Certified Financial Planner certification from the University of Georgia’s Terry School of Business. He is Co-founder of Peachtree Financial Group, a boutique registered investment advisory firm and Managing Partner of Peachtree College Planning. He was appointed twice as a Commissioner at the Fulton County Housing Authority and still serves today.
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