Getting Uncle Sam to Chip in For College

By October 11, 2019June 30th, 2022No Comments

I recently talked about reducing the cost of college. Another way to reduce the cost? Take advantage of the money available to many students!

Many high income earners assume the Federal government won’t help with college expenses. Aren’t Federal grants, loans, and work–study jobs only for those needing financial aid? (I bet you already know where I’m going with this…)

Getting Aid

The U.S. Department of Education’s (DOE) financial aid calculation considers more than income. Assets, family size, and other financial obligations also factor into the calculation.

The type of asset matters too. Only a small percentage of parents’ assets count as potential contributions. Other types of assets, including home equity and savings in IRAs and 401(k) plans, aren’t considered at all.

Filing the FAFSA

You should always file a Free Application for Federal Student Aid (FAFSA), even if you don’t expect to get Federal financial aid. That’s because it’s the primary qualifying form many college, state, local, and private aid programs use.

The simplest way to complete the FAFSA is by applying online at the Federal Student Aid website. Filling out the form online will alert you to mistakes or omissions. It can also speed up the processing time by one to two weeks.

Get it filed ASAP after October 1 if your child starts college next fall! Deadlines for submitting FAFSA information can be early in the year for some colleges and state awards programs. Keep in mind: you may request that your financial information be sent to up to six colleges.

As a parent, you’ll need several documents to complete the FAFSA:

    • Federal income tax return and W-2 forms from the previous year;
    • Current bank statements;
    • Records of untaxed income, such as Social Security or veteran benefits;
    • Current business and investment mortgage information; and
    • Investment records.

If you’re divorced and are the child’s custodial parent, the calculation is a bit different. Only your own household’s income and assets (including any child support and alimony) are required by the FAFSA. Some colleges count the financial resources of the noncustodial parent but the Federal government does not.

The Student Aid Report

Within a few days to a month after filing the FAFSA, you should receive by mail or e–mail a Student Aid Report (SAR). On the SAR, you will find the Expected Family Contribution (EFC). This estimates the amount of your family contribution toward the student’s college expenses for the year. The colleges you listed on the FAFSA will use this figure to help determine the amount and type of any financial aid you will receive.

Each college that accepts your child and determines aid eligibility will prepare an aid package. This package should cover all or part of the difference between your family’s EFC and the cost of the college. Your family’s income and the school’s resources may affect aid packages, too.

Federal Aid

The Federal aid included in your aid package is largely based on family income. Lower–income students may receive grants that don’t need repayment, like the Pell Grant. More help may be available in the form of a Federal work–study job.

Besides these awards, students may be eligible for subsidized Federal loans, such as the Perkins Loan or the Stafford Loan. These loans must be repaid by the student. The good news is that the government pays the interest while the student is in school and during grace and deferment periods.

Your family may also be offered an unsubsidized Stafford Loan, which must be repaid by the student, or a PLUS Loan, which is in the name of the parents. Interest builds on these loans from the time the funds are disbursed. Luckily, payments may be deferred until after graduation.

When loans offered by Federal programs aren’t enough to cover the costs, you can apply for a private education loan. Be careful with these – they tend to have higher interest rates than government loans. To learn more, visit or the Federal Student Aid website.

The moral of the story: you can find funds to help offset the cost of college in many places. Regardless of your income, fill out the FAFSA. See what each college can offer. Take advantage of the many Federal aid programs. Every dollar you find is one less out of your pocket!

Elliott Weir, CFP

Elliott Weir, CFP

I work with recently widowed women looking for a different kind of relationship with a financial adviser. No products sold, no costs hidden, and no pressure for hasty decisions - all for a clearly disclosed fixed fee. For those women wanting the patient guidance of an experienced professional paid only to help them, III Financial offers a distinctive alternative to typical insurance agents, investment managers, and wealth managers.

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