PracticalDad:  Critiquing the FAFSA

If there’s anything that drives fear into the heart of a parent – apart from orthodontists – it’s the dreaded FAFSA.  This instrument, the Free Application for Federal Student Aid, garners the financial information used by colleges to ascertain the size and composition of financial aid packages for students that have applied to college.  Listen to enough parents and the sense you get is that it’s an unpleasant, painful necessity, akin to having to complete the last inning of a baseball game when you’re down by more than two dozen runs.  C’mon guys, we can do it!  We can pull this one out!  We can…aw, to hell with it.  But is it the creature it’s made out to be and what’s it really like to complete it?

The FAFSA has especially taken on greater meaning in the past two decades as college costs have spiraled upwards, disproportionate to the actual cost of living for everything else.  We’ve been told that education is the key to the future in a knowledge-based economy and the income data is clear that kids with college degrees earn more over a lifetime than those with just high school diplomas; parents consequently want to assure that the kids get the education they need to survive, let alone succeed.  This instrument is the key tool used by colleges and universities to allocate the available funds amongst the mass of kids and families desiring that key to the future.

FAFSA Basics

  • The form for each upcoming school year is available on January 1st of that year; so the 2012 – 13 school year allocations are based upon the FAFSA instrument available on January 1, 2012.  Most institutions want the completed data by March 1, so there’s a two month window in which to gather the data and complete the FAFSA.  Curiously, this two month window coincides with the peak drinking season of middle-aged men.
  • Much of the data collected pertains to demographic and family information.  How many other siblings are there and more importantly, are any of them in college?  Is the child in question an emancipated minor (did you kick his lazy butt out and have him legally declared an adult at age 11)? 
  • The actual financial data collected depends heavily upon the family income and non-retirement assets of the family, so you ideally need to have completed the federal taxes when you sit down with the FAFSA.  You can complete the instrument with estimates as to your adjusted gross income and colleges will make provisional decisions, but these are subject to revision when the 1040 is submitted.  Guess wrong in February and you’re liable to receive an unpleasant surprise in May.  If you’re like most and the bulk of your assets are tied up in retirement funds, then the financial information required is much less onerous than if you own rental properties and have payments from the installments of land sales.  Of course, if you have rental properties and payments from land sale installments, you might want to seriously consider bagging the entire process unless you enjoy a good laugh.

Completing the Form

  • The form can be completed online and in our case, took less than an hour to complete.  Much of the effort on my part came from actually completing and submitting the returns earlier than I normally would.
  • The FAFSA now has an electronic download linkage with the IRS so that your relevant tax data can be simply downloaded from the IRS.  That said, there is about a two week IRS processing lag so if you’re filing the FAFSA immediately after your taxes, just use a hard copy of the return for reference purposes.  The relevant questions will point you to exactly what lines on the forms are required for the actual answers, so it’s not difficult.
  • The instrument is actually well laid out.  In some sections with a significant number of questions, the system only asks you one question at a time and after you’ve answered and clicked Next, will come up with the next question.  That way,  it’s assured that all of the questions are answered and you’re assured that your mind isn’t going to be blown by the number of questions (more than 80).
  • Because it’s capturing data for a large mass of families, think of a Bell Curve.  While there are a lot of questions asked, the large majority of families are within about 80% of the curve and many of the questions are designed to capture information for those at the outlying ends of the curve.  Again, it took us less than an hour to complete the form.
  • The only paper document that we required was the recently completed tax return.  Otherwise, we handled it on two laptops as my wife did the form while I used mine to obtain asset values from the bank and 529 websites.
  • The completed instrument will only be submitted to those institutions that you specify.  While each has its own unique code identifier, there is a search function that allows you to search for, and load, the identifier instead of having to cuss your way through a stack of college correspondence. 
  • When completing the assets section, there is clarification for the various assets.  This is especially helpful if you have a 529 plan and have to allocate it as a student asset or a parental asset.  Parsing these definitions were the most complicated part of the entire process.
  • The response to the completed paperwork is called the Expected Family Contribution and ours was available shortly afterwards.  The EFC is not the final answer for what your child will receive, but it’s a figure that’s used by the college financial aid staff as they calculate what the kid’s offered and what one offers might be very different from another.

FAFSA Comments

Let’s start with the EFC since that provided the greatest laugh of the night.  Multiple factors compose the EFC calculation, including the number of kids in the family, assets and income; what struck me was, in a sense, comparability to sitting down with a mortgage broker to discuss what size loan you can afford.  In the mortgage case, I’ve had brokers state that we can afford a certain amount while the reality is very different.  Likewise, our EFC – and no, I’m not going to share – was such that it would be theoretically affordable if we ignored everything except for the most basic of necessities and frankly, I’m not certain how we’d make it with that.  The EFC is a starting point, but not one necessarily grounded in reality.

The instrument itself was straightforward and I’ve had greater issues preparing my state income taxes.  The site is well-designed and after finishing it, it was apparent that there’s considerably greater emotional overlay to the FAFSA than actual pain.  As we parsed the questions and completed the form, what stayed with me was the question of whether we’d done enough through the years.  Could we have saved more?  What if I’d invested this way instead of another?  How will we manage it when Middle and Youngest are up the plate?  And above all, the hard realization that Eldest really is going to be leaving for college in six months.  Dear God, she’s leaving…where did the time go?

My father sometimes commented that things were generally much easier if your ducks were lined up in a row first.  Take your time, line up your ducks and the FAFSA isn’t going to be a major issue.  It’s helpful though, to check your emotions at the door.



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