Want a recipe to save some much-needed college dough?
The first ingredient in our recipe is a form called the Free Application for Federal Student Aid—what is commonly referred to as the FAFSA form. Used by the federal government as well as individual colleges, this form is designed to collect information about your family's income and assets.
Based on the data collected on this form (and sometimes an additional form called the CSS/Financial Aid PROFILE), colleges calculate your financial need. Here's the formula they use:
Financial Need = Cost of Attendance - Expected Family Contribution
What this formula implies is that your chosen college will take the total cost of attending the school and subtract how much they think you can afford to pay (your expected family contribution). Any amount left over is your financial need.
The beauty of this formula is that there are actually two ways to increase the financial aid dollars you ultimately receive.
The first way is to increase your cost of attendance. Let's say you decide to attend an expensive private university (that costs $40,000 per year) rather than an inexpensive community college (that costs $2,500 per year). In this scenario, your annual cost of attendance went up by $37,500, thereby boosting your financial need by $37,500, too.
This is why you should never rule out a school solely because of the "sticker" price: If you attend a more expensive school, you are likely to receive more financial aid. Put another way, a higher cost of attendance doesn't necessarily mean you would pay more out of your pocket.
The second way to increase your financial need is by lowering your expected family contribution. Think of your family's financial resources as a kitchen stocked with eggs, flour, butter, salt, sugar and yeast. With those ingredients on hand, you could either bake a loaf of bread or perhaps make some fresh pasta—two foods loaded with carbohydrates.
But what if our government-mandated "carb-o-meter" was only designed to measure the carbs in bread? If your goal was to reduce the total number of carbs being counted—while consuming as many carbs as possible—it would be wiser to cook more spaghetti and slice fewer bagels.
Likewise, by shifting income and assets to those areas that are not measured (like "pasta" in the above example), you can lower your expected family contribution (the number of "carbs" being counted) and consequently secure a larger financial aid award.
What types of financial resources aren't generally measured by the system? Some notable ones include retirement assets you've already accumulated, employer perks that don't contribute to income, cash-value life insurance policies, and bigger-ticket purchases like a computer or car.
Whether or not home equity is measured (it isn't counted at most public colleges) varies from school to school.
Because the system completely ignores credit card and consumer debt—families with high debt levels are not deemed to have greater need—try to pay off such debt before submitting your FAFSA form. If you draw from your bank account to pay down credit cards, you'll reduce your measured assets and cause an increase in financial need—plus you'll save a bunch on high credit card interest.
One more important point: Because colleges have finite financial aid budgets and award need-based aid on a first-come, first-served basis, they are usually more generous with their resources if you submit your financial aid forms in January or February, rather than April. Most schools also have greater flexibility earlier in the season to increase your initial financial aid offer should you decide to appeal.
So get that FAFSA form in early!
Known as "America's Scholarship Coach," Ben Kaplan is publisher of the www.CityofCollegeDreams.org website and the winner of two dozen college scholarships worth $90,000. For more details on this topic, visit his Financial Aid information page.
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