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by Agnes Jasinski

A new study out today shows that it literally pays off to ask for help if you're feeling lost while filling out your FAFSA. The National Bureau of Economic Research has found that low- and moderate-income financial aid applicants who received help from professional tax preparers when filling out their FAFSAs not only received more generous aid packages, but were more likely to apply for aid compared to those navigating the process independently.

The FAFSA can be daunting, and it isn't surprising to hear many students are intimidated by the process or skeptical that they will  receive any need-based aid at all. Still, it's rare to see data on such anecdotal topics. The study was based on results from three groups. One group received help from several H&R Block tax professionals; the second received some financial aid advice, but did not receive personalized assistance; the third received no help in completing their FAFSAs. The results showed that it isn't enough to tell students to fill out the FAFSA and give them the form. The group with the most personalized assistance fared best in terms of how much funding they were approved for, and more generally, whether they would be going to college at all.

The federal government and higher education advocates have been working for years to come up with ways to simplify the financial aid application process. The Student Aid and Fiscal Responsibility Act of 2009 that recently passed in the House of Representatives includes a clause that would streamline the application and make it easier to understand for students. The study suggests that students who have trouble filling out applications or who avoid the financial aid process altogether for one reason or another are significantly less likely to go to college. Often the financial aid students receive is a determining factor in the campus they'll find themselves come fall, and if you don't apply for the need-based aid, no one is going to hand you any or often even urge you to fill out that FAFSA application.

Researchers from the study hope the results will lead to programming and services where students are not only told to fill out the applications as part of the college admissions process, but receive automatic assistance in completing their FAFSAs. If you're nervous about doing it on your own come Jan. 1 when the applications first become available for processing, ask for help. Browse through our site to find tips on landing the most free money and filling out the application correctly, as the smallest mistake can lead to delays in not only the processing of your FAFSA, but in the awarding of scholarships, grants and student loans that you're relying on to pay for that college degree.

by Emily

While April may be the cruelest month, March can be especially rough for students bound for college or graduate school.  Late March and early April are when admissions decisions and financial aid letters roll out for those not immediately accepted or rejected by their dream schools, and around now, things are getting pretty agonizing.  While a large part of March is consumed by waiting, even those who have already received good news may be consumed by the crushing dread of all the work to be done before September.  After all, if you get into a college or graduate school, you still have to figure out how to pay for it, what classes to take, what forms to complete, what to do with your life between now and then, and for many students, how to graduate on time, as well.  So, while you may still be waiting for a decision, there are things you can do in March to make April through August easier.

First, budget your time.  Figure out the things you'll need to do, and make a plan to get them done.  While you can't yet pick your classes or contact an unassigned roommate to figure out who is bringing the fridge or the TV, you can take care of other things.

If you haven't done so yet, complete the FAFSA.  If you did a FAFSA with your 2007 tax information, do your 2008 taxes and submit a correction.  Check your student aid report to see if you were chosen for verification, a process roughly equivalent to an audit of your FAFSA that is conducted by your college.  Colleges receive a glut of verification forms towards the start of the school year, and a delay in completing it can result in a delay in financial aid.  If you're not sure you've done everything you need to receive aid on time, contact the college to make sure.  It's better to find out now than to find out on the first day of classes when you need to buy books and find that you can't.

Keep searching for scholarships and submitting scholarship applications.  Deadlines are approaching rapidly, and available scholarships for the 2009-2010 academic year will only get more sparse as you approach the start of the fall semester.  This doesn't just go for high schoolers--if you're a soon-to-be graduate student with an acceptance letter in hand, but no assistantship or fellowship, don't count on funding emerging later. This can and does happen, but many schools make these awards with their admission decisions.

If you've received your financial aid award letter at your college of choice and it's come up drastically short, look into options for appealing it, especially if your financial circumstances have changed or if you've gotten a better offer from a different school.  You may also want to start shopping around for student loans. You might not be able to apply until summer (and you might not want to if you're currently applying for scholarships), but knowing what's out there now can help later.

If you take these steps now, then it will be easier to direct your spring and summer towards enjoying (or enduring) school, preparing to graduate, and figuring out your summer plans.  You'll also be less rushed and less likely to forget to do important things, like signing up to register for classes or mailing in a deposit on time.

by Emily

With President Obama's proposal to end the bank-based Federal Family Education Loan Program, there has been much speculation on what role would be left for banks in student loans, as well as which banks would be allowed to play that role.  An announcement made yesterday by the Department of Education indicates that at least four banks will remain involved in federal student loans for the forseeable future.

The Department of Education has selected four companies to service loans made through the federal Direct Loans program.  Sallie Mae, Nelnet, American Education Services/Pennsylvania Higher Education Assistance Agency, and Great Lakes Education Loan Services will all be awarded contracts of five to ten years to manage the increasing volume of student loans the federal government owns.

The servicers selected will be responsible for the student loans currently in the Direct Loans system, as well as loans the federal government has purchased as part of the federal rescue plan.  If all federal student loans are moved into Direct Loans, these agencies will also service them.  For now, what this means for student borrowers is that you may be dealing with different people if you have questions about your Stafford loans next year.  However, if Congress eliminates FFEL, this news could become more significant.

by Emily

As part of his campaign's focus on education, President Obama pledged his administration would address issues of the financial aid application process, such as the length and complexity of the Free Application for Federal Student Aid, or FAFSA. Education Secretary Arne Duncan has previewed some of the administration's proposed changes, with a formal announcement expected today. While not as sweeping as the two-page FAFSA EZ Congress already mandated when renewing the Higher Education Act last year, these changes are still a step towards simpler financial aid applications.

Changes will be rolled out in phases, with the first phase being a smarter FAFSA on the Web.  Rather than forcing students to read fine print to determine whether they need to provide information requested by each question, as of next January, the application will use the information students have provided to determine which questions they need to answer.  Students with independent status will not be shown the questions about parental income and low-income students will not be shown certain questions about assets that they don't need to complete.  This is a fairly simple step to save time and hassle, and eliminate some of the barriers that keep students most likely to be eligible for federal grant programs from applying.

A pilot program has also been initaited to test the feasibility of allowing students to access their tax information online to complete the FAFSA.  If successful, it could be expanded to all users, saving headaches involved in finding their 1040s, W2s and related forms, then scouring each for the correct lines to copy into the FAFSA.

Duncan also stated that the administration will seek permission from Congress to begin taking steps that could eventually result in eliminating the FAFSA entirely and relying solely on tax information to apply for federal student financial aid.  While not explicitly stated by Duncan, it could be an end result of his request to Congress to remove questions from the FAFSA that do not pertain to information reported to the IRS on a student's (or their parents') 1040.  Once the complicated need analysis formula of the FAFSA has been set aside in favor of this simplified process, the idea of allowing students to apply for aid by checking a box on their tax return seems almost within reach.

by Emily

Along with acceptance and rejection letters, colleges are sending out another nerve-wracking piece of mail this month: the financial aid award letter.  For many families who have only recently discovered the "joys" of completing the FAFSA, the financial aid letter can bring about a whole new kind of terror and confusion.  Even for people who are somewhat familiar with aid, deconstructing the naming conventions and occasionally less-than-detailed explanations on various colleges' award letters can be frustrating, as can mounting an effective comparison among differing aid packages.  Below is the first part in a series on understanding your financial aid award letter.

Understanding Your Financial Aid Award Letter, Part I: COA and EFC

Two of the most important numbers on your award notice will be the cost of attendance (COA) and the expected family contribution (EFC). These are instrumental in determining your award, and they also have some of the most obscure and misleading meanings. Despite their prominence, they're occasionally tucked in strange places on the letter, such as near the bottom or in a box in the middle. Finding them can kind of be a Where's Waldo moment.

Cost of Attendance

The cost of attendance, often abbreviated COA, is occasionally referred to by other names, such as your "budget."  This number is not what you owe the school, nor what a year of education will necessarily cost you there. Instead, it is the average amount paid by a student in your situation: dependent living on campus, independent living off-campus, part-time living rent-free at home, etc. The COA will include tuition, student fees (these could change if you later register for classes with special fees, such as art or aviation), room and board (either what the school is charging you or what the average student in your housing situation pays), books, and miscellaneous living expenses.  Your school's financial aid office will likely have a detailed breakdown of this number available online or in the office if you ask.

The important thing to realize here is that this number is significantly higher than the amount of money you will actually owe the school. If you plan on working your way through college or receiving assistance from your parents for living expenses, you may not need aid to cover your full COA. It can still be a good tool for comparing among colleges, though, especially since they factor in handy things like average living expenses in the area.

Expected Family Contribution

The other big number on your award letter will be the expected family contribution, or E FC. Again, this is not the amount your family actually owes the school or is expected to pay out-of-pocket. Instead, this is the amount that, according to the information you submitted on your FAFSA, a family in your situation should ideally be able to contribute towards a college education. This is used to determine your eligibility for "need-based" aid, which includes state and federal grants, work-study, and even subsidized loans. Certain grants and scholarships can only be awarded to students with an EFC below a specific number (for example, 4671 for Federal Pell Grants), so if you are not eligible for grants but your financial circumstances have changed since 2008, talk to your financial aid office to see if your EFC can be adjusted downward.

Your EFC should be the same at pretty much every school, since they're using the same information to determine it (some schools require both a FAFSA and a CSS profile, so there could potentially be some differences).  However, it's still useful for comparisons among schools, since you can use it to determine whether your full "financial need" has been met by each school. Like nearly everything else in student financial aid, this term does not necessarily mean what one might think it should mean. Your financial need is a number calculated based on the two numbers we just discussed.  Your full financial need is your COA minus your EFC, and your unmet financial need is generally your COA minus your EFC minus any need-based aid and scholarship awards you've received.

So, how do you determine what the need-based awards and scholarships are on your award letter?  Check out Part II for that information.

by Emily

Today we move on to the final part of our Understanding Your Financial Aid Award Letter series.  If you were lucky enough to have your entire tuition paid through free money for college, then you can stop reading now.  But the vast majority of students who apply for aid will be awarded at least one less ideal form of financial aid.  Sorting through the rest of your award letter is the tough part--this is where difficult choices may need to be made, including whether and how much to borrow.

Understanding Your Award Letter, Part III: Work-Study and Student Loans

While you probably would not want to decline any of the free money we discussed last week, you may want to turn down some of the aid covered today.  You are allowed to decline any assistance on your award letter if you feel you will not need it, and you can also elect to take a smaller amount than what is given.  Keep this in mind when budgeting for the year, and don't feel obligated to borrow more than you need.  If you change your mind and need this aid later, you can usually get it back.

Federal Work-Study

If you have remaining financial need after any grants and scholarships you've been awarded, you may see an award of federal work-study on your letter.  This is a federally subsidized program for students working certain jobs on, and occasionally off, campus.  Work-study is not money you will receive up front.  You need to get a job that is funded through the work-study program to receive this money, and it will be given to you as a paycheck, not as money off your bill.  Since many jobs on campus are reserved for work-study students, it can be a great option if you're planning to work while you're in college.

However, if you already have a job that is not funded through work-study or you do not plan to work, you may want to decline this award.  There's no penalty for failing to use your work-study, but if you've been funded to your full need or cost of attendance, canceling your work-study may free up space for more or better student loans than you would have otherwise received.

Student Loans

There are two main categories of student loans: federal loans and private loans.  Federal loans include subsidized and unsubsidized Stafford Loans, as well as Perkins Loans and PLUS Loans.  Private loans come from banks and typically carry higher interest rates, though some states offer their own low-interest student loan programs.  Depending on whether the school you attend participates in the Federal Direct Loans Program, or the bank-based Federal Family Education Loan Program, your federal Stafford Loans and PLUS Loans may be issued by a bank, but their terms are still set by the federal government.  We have more detailed breakdowns of the different forms of student loans on our site, but here's a quick refresher, in rough order of desirability.

Federal Perkins Loans

Currently, Perkins Loans have limited funding and are often reserved for students with higher financial need.  Schools award these at their discretion, but you apply for them through the FAFSA.  However, if you receive one, you may want to take it, as they currently carry the lowest interest rates and some of the most favorable repayment terms.  Perkins Loans have a fixed 5 percent interest rate and a 10 year repayment period.  They are subsidized loans, which means interest does not accrue while you are in school.  They also have a 9-month grace period before repayment begins.  The current Perkins Loan limits are $5,500 per year for undergraduates and $8,000 per year for graduate students.

Federal Stafford Loans

PLUS Loans

You may or may not see a PLUS Loan listed on your award letter.  This is a federal loan program that allows parents to borrow for their students, up to the student's full cost of attendance.  Some schools include these to fill the gap between your financial aid and your cost of attendance, as a way of letting you know the option exists.  While you are guaranteed to receive a Stafford Loan regardless of your credit, so long as you complete a few basic requirements, PLUS Loans, like private loans, require an application and a credit check (if your parents are denied a PLUS Loan, you can apply for additional Stafford Loans through the financial aid office).

Whether or not you see a PLUS Loan on your award letter, if you still need to borrow money to pay for school, this loan can be an option for many.  PLUS Loans currently carry a fixed interest rate of 7.9 percent for Direct Loans and 8.5 percent for FFEL.  Loans can be repaid immediately or starting six months after graduation, but interest will accrue while you're in school.  Research the relative merits of PLUS Loans and various private loans and discuss with your family which option will be best for you.

For students used to syncing just about every website they visit with Facebook, the amount of manual data entry involved in applying for financial aid can seem completely alien and unnecessary. In fact, many students who would qualify for aid either fail to complete the FAFSA or do so incorrectly, due to the confusing and time-consuming nature of the application process.

Members of the higher education community were concerned about this, as well, so when Congress renewed the Higher Education Act last year, they included a provision to update the FAFSA to make it easier for families to complete. The proposed changes will go into effect in 2010, and some students could be seeing a simpler FAFSA as soon as January.

Under the new system, students completing the FAFSA on the Web will be able to automatically fill in their FAFSA with relevant information from their previous year's tax return. Starting in January, select users who click on "Fill Out Your FAFSA" will be asked if they'd like to access the IRS Data Retrieval Tool to do so. From there, they can enter their Federal Student Aid PIN then be taken to the IRS website where they can retrieve their tax information and click "Transfer Now" to automatically fill in the applicable lines on the FAFSA form. Dependent students will have to repeat this process for their parents' information.

While it still involves multiple steps and websites, the new process is a significant improvement over the current process of hunting for your tax return, begging your parents for their tax returns, sorting through pages of numbers and instructions, and carefully transcribing numbers from one form to another each year. The Department of Education hopes that the more automated and streamlined FAFSA will reduce errors and encourage more students to apply for federal student financial aid.

Only a small group of students who are filing a FAFSA for the current academic year will see the new FAFSA completion options in January. The option will be available for all FAFSA filers for 2010-2011 in July. Although you may be stuck filling out your FAFSA the old way next year, you can at least take some comfort in the knowledge that this will be the last time.

by Alexis Mattera

If you are attending college, you probably need some form of financial aid to pay for tuition, room and board, books and other living expenses. Next year, it’s likely you’ll need a little bit more.

The Columbus Dispatch recently reported the number of students in the U.S. who have filed forms for federal financial aid for the 2011-2012 academic year has increased by about 1 million from last year. At Ohio State alone, requests are up about 10,600 from two years ago - a 22-percent jump, says financial aid director Diane Stemper. Ohio University’s Sondra Williams reports a similar trend with a 12-percent increase in federal financial aid applications. The reasons for the increased need aren’t surprising. "Many people who used to have the resources to send their children to college have lost their jobs or been downsized," Stemper said, adding lower home and stock values and rising food and gas prices are also culprits.

Though more students are getting the aid they require – OSU has seen an increase in Pell Grant recipients enrolled and OU has more students receiving subsidized loans – the financial relief may be short-lived: Governor John Kasich’s state budget proposal has public universities in Ohio could increasing tuition by up to 3.5 percent. Current undergraduate and graduate students, do you need more financial aid now than you did when you first enrolled? High schoolers and incoming freshman, how do you plan to pay for school?

Yesterday, the House of Representatives formally introduced legislation to reshape federal student loans, federal Pell Grants, and other aspects of student financial aid. The Student Aid and Fiscal Responsibility Act of 2009 builds on presidential budget recommendations and features several substantial changes to student aid.

A preliminary breakdown of the bill provided by the National Association of Student Financial Aid Administrators lays out the following proposed changes:

• Dividing the Federal Pell Grant into mandatory and appropriated funding, then fixing the mandatory portion to the consumer price index plus 1 percent. Currently, the mandatory portion of the grant is $490 and the appropriated portion is $4860, so if these proportions remain the same, increases in the Pell Grant would still largely be at the whim of Congress each year.
• Eliminating several questions on the FAFSA related to assets, but preventing anyone with assets of over $150,000 from qualifying for federal student aid.
• Ending the Federal Family Education Loan Program and moving all federal Stafford Loans to Direct Loans.
• Ending subsidized Stafford Loans for graduate and professional students in 2015.
• Reverting to a variable interest rate that would be capped at 6.8 percent for subsidized Stafford Loans.
• Expanding the Federal Perkins Loan program, with part of the new funding going specifically to schools that keep tuition low and graduate a high proportion of Pell-eligible students.
• Changing the rules for drug offenses to make students ineligible for aid only if they've been arrested for selling a controlled substance.

The Democratic majority in the House has indicated a strong intention to pass this bill quickly, with the Committee on Education and Labor planning to vote on it as early as next week.

by Emily

Though it's a day off from school and work, New Year's Day is often seen as a day to get down to business.  While you're starting in on your New Year's resolutions, opening up a new calendar, and packing up the holiday decorations, there's one more thing that college students and college-bound high school students should consider doing.  The Department of Education starts accepting the 2009-2010 Free Application for Federal Student Aid (more commonly known as "FAFSA") on January 1.  State application deadlines start happening soon after, beginning with Connecticut's February 15 priority deadline.  So while you might not be starting school until August or September, you want to be applying for financial aid right now.

What You Need

In order to complete a FAFSA, you will need the following documents: 

 
• your social security card
 
• a driver's license if you have one
 
• bank statements and records of investments (if you have any)
 
• records of untaxed income (again, if you have any)
 
• your 2008 tax return and W2s
 
• all of the above for your parents if you are considered a dependent (to determine dependency status, check here)
 
• a PIN number to sign electronically (go to pin.ed.gov to get one)
 

If you do not have your tax information yet, and most likely you don't, you can use your 2007 tax information to estimate 2008.  That way, you have a FAFSA on file and once you've done your taxes for the new year, you'll be able to submit a correction online.  While that might seem like more work, it's the best recipe for maximizing your state and campus-based aid packages.  If things changed drastically for your family in 2008, apply for student financial aid with the information you have, then talk to your school's financial aid office to adjust your information accordingly.

Why You Should Apply

Completing a FAFSA is an important step in funding your education if you don't plan on paying for everything out-of-pocket.  The FAFSA is used by the Department of Education to determine eligibility for federal student financial aid for college.  This aid includes federal grant programs (such as the Pell Grant), federal work-study, and federal student loans.  It is also used by states to determine eligibility for their financial aid programs, such as state grants.  Colleges also use the FAFSA to determine eligibility for the need-based aid programs they administer.  Finally, many scholarship opportunities request FAFSA information as part of their application process.  Even if you think that you won't qualify for free money in the form of need-based college scholarships and grants, you should still apply.  At the minimum, the vast majority of students qualify for Stafford Loans, low-interest federal student loans that represent one of the best deals in borrowing for school.

Where To Get More Information

Start on the FAFSA homepage and go through the links under "Before Beginning a FAFSA" to get started, especially if this is your first time filing.  You'll find information about application deadlines, required documents, applying for a PIN, and other things you need to know about to begin.  If you don't want to wait until tomorrow, 2009-2010 worksheets are already available on fafsa.ed.gov.  The ambitious among us can even fill out a worksheet now, then copy the information into their FAFSA on the Web beginning tomorrow.

We also offer a wealth of resources on financial aid at Scholarships.com.  Check out the financial aid section on our Resources page for further reading.