College Financial Aid Planning - 2021 | Best Guide - CPA Clinics
Many factors affect eligibility for federal financial aid; therefore, all students should apply for college financial aid every year even if they think they do not otherwise qualify.
FAFSA. The Free Application for Federal Student Aid (FAFSA) is the first step in the college financial aid process. Students use the FAFSA to apply for federal student aid, such as grants, loans, and work-study.
The FAFSA must be submitted for each year the student wants college financial aid.
Income tax return. If you are filing a 2021–2022 FAFSA form, the federal information from your 2019 income tax return is used.
Expected Family Contribution. The questions on the FAFSA are required to calculate the student’s Expected Family Contribution (EFC). The EFC measures the student’s family’s financial strength and is used to determine the student’s eligibility for federal student aid. The EFC is split between an expected amount contributed from the student (usually more) and an expected amount being contributed from the parents.
Student Aid Report. A student’s EFC will be listed on their Student Aid Report (SAR). The SAR summarizes the information submitted on the student’s FAFSA.
Financial need. Financial need is the difference between the EFC and the college’s cost of attendance (which can include living expenses), as determined by the college. The college will use the student’s EFC to prepare a college financial aid package to help meet financial need.
Need analysis formula. To determine financial need, a need analysis formula measures the parents’ and student’s assets and income. Assets are measured as follows.
Paying off credit card debt and automobile loans will increase eligibility for college financial aid by reducing available cash.
To maximize eligibility for college financial aid, reduce cash and other assets by prepaying mortgage debt. In addition, parents could take out a home equity line of credit each year to pay for the student’s school expenses. The loan would reduce assets considered by the need-based formula.
A student should contact his or her financial aid office if the student or his or her family has unusual circumstances that should be taken into account in determining financial need. Some examples of unusual circumstances are unusual medical or dental expenses or a large change in income from last year to this year.
Information about other non-federal assistance may be available from foundations, religious organizations, community organizations, and civic groups, as well as organizations related to a student’s field of interest, such as the American Medical Association or American Bar Association. Check with the parents’ employers or unions to see if they award scholarships or have tuition payment plans.
If a student is considered an independent, he or she does not have to include any parental income or assets on the FAFSA application. A student is considered an independent if he or she: