Forget about tax season. Parents have been scrambling since the first of January to prepare for the mother of all financial marathons: filling out the Federal Application for Federal Student Aid (FAFSA).
For many families, the FAFSA – which determines how much federal and state aid they'll pocket – is the first obstacle facing their kids on the road to college.
And like most financial products on the market these days, it's also a beast to fill out.
Clocking in at six pages long, it comes packed with 153 questions – more than twice the number you'll find on a federal tax form, according to Fastweb.com.
That leaves ample room for parents and students to trip up along the way, creating a trail of tiny errors that could delay or even disqualify them from receiving aid.
1. Playing the waiting game.
FAFSA requires all sorts of tax-related information, so a lot of parents wait till they've filed their taxes by April to start working on the form. That's a big no-no, especially as many states have their own specific deadlines (usually in the early spring) and late-comers will have to make due with whatever money's left on the table – if there's anything at all.
You're better off filling out the form using an estimate of your tax information and then updating it once you've completed your return, Kantrowitz says. Take advantage of the FAFSA-IRS Data Retrieval Process tool, which lets parents transfer their federal tax information straight from their 2011 tax returns to the FAFSA.
2. Fudging your tax info
If your household earns enough to file taxes, you won't have a hope of getting financial aid until you've filed. The Dept. of Education and IRS are working together to crack down on families who under-report their taxable income on FAFSA forms, Kantrowitz says, in the hopes of lowering the existing 4-5% fraud rate.
Other tax errors: Reporting your total income tax as equal to your Adjusted Gross Income (AGI) Reporting taxes withheld or tax due instead of total income tax. "Be sure you are reporting the total total income tax (the total tax liability) and not just the withholdings or the additional taxes due," Kantrowitz says.
3. Forgetting who the form's about
The FAFSA form is about the student, not the parent, although both are usually involved in the process. Pay close attention to whose identification information the form is seeking. It's almost always referring to the student, and if someone slips up and throws a parent's SSN in somewhere, it could throw a wrench in the application process. If your parent has no SSN, use the code " 000-00-0000" rather than making up one or using a taxpayer ID.
4. Marital status mix-ups
If you're planning to get hitched, keep in mind you won't be able to change your marital status on a FAFSA form after you've submitted, Kantrowitz notes.
Divorced parents: Whichever parent the student has lived with the most over the last 12 months should be responsible for the FAFSA. If the filing parent has re-married, his or her new spouse must report their income on the form as well.
5. Miscalculating assets
If you're filing as a dependent student, you don't have to include these assets on your FAFSA: Custodial 529 college savings plans, custodial prepaid tuition plans, custodial Coverdell Education Savings Accounts.
Also, when filling out the section for student assets, parents and independent students shouldn't include their 401(k), IRA, pensions, or life insurance policies as assets.
6. Silly errors
Both parents and students are guilty of these mistakes: misspelled names, missing question fields and incorrectly written dollar values. For example, FAFSA forms don't read cents, so you need to type $500 rather than $500.00. Otherwise, it'll be read as $50,000.
The number one mistake students make? Leaving fields blank, Kantrowitz says: "If the answer is zero or the question does not apply to you, write in a 0. Do not use dashes or leave the question blank. If you leave an income or asset question blank, the federal processor will assume that you forgot to answer the question."
7. Not applying at all
This is the surest way to shoot yourself in the foot, yet Kantrowitz says parents still underestimate the aid they'll receive from FAFSA.
"You can't get any money if you don't apply and it's important everybody apply for FAFSA, even if you don't expect to qualify," he says.
The form is tied to just about every federal and state grant in the country and is a prerequisite for useful support like Parent PLUS loans and federal subsidized loans, which carry far lower interest rates than private loans.
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