Financial aid

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Filling out the forms

The FAFSA (Free Application for Federal Student Aid) is the starting point for most need-based aid programs, including federal grants, loans and work-study funds. This is generally considered the No. 1 place to start your search for aid — even if your clients don't think they qualify for aid, it's worth filling out the application just in case. They might be surprised at the results — and every little bit counts toward their ultimate goal.

Fill out the FAFSA.

Another common financial aid form is the CSS/Financial Aid PROFILE, which is used by a long list of private colleges and universities to award their own financial aid packages to students.

Fill out the CSS/Financial Aid PROFILE.

How can 529s and financial aid work together?

One of the biggest questions parents have about 529 plans is how they affect need-based financial aid.

When calculating eligibility, FAFSA treats assets and income differently, and it also treats 529 accounts differently depending on who owns them.

Account owner
Dependent student Custodial parent Grandparents/others
Assets Student-owned accounts are counted as parental assets on the FAFSA. Parent-owned accounts are counted as parental assets on the FAFSA. Grandparent-owned accounts are not included in FAFSA asset calculations.
Income Qualified distributions are not counted as income. Qualified distributions are not counted as income. Distributions from a grandparent's plan are counted as "untaxed student income."

What do kittens have in common with 529 college savings plans and financial aid?
Find out!

Assets. The federal aid formula assesses parental assets at a maximum rate of 5.64%. That means that in general, for every $1,000 in a 529, the "expected family contribution" toward college costs could increase by only $56 at most. Importantly, 529 accounts owned by dependent students are counted as parental assets and assessed at the 5.64% rate — this is significant because other types of student assets can be assessed at the much higher rate of 20%.

Income. Qualified distributions from student and parent accounts are not counted toward a student's income. On the other hand, distributions from accounts owned by grandparents and other relatives are counted as student income, and would factor into calculations for next-year financial aid.

The above is a general description of federal FAFSA rules as of May 2016. Rules are subject to change. Individual schools may have their own rules in regard to need-based scholarships.

Free money: Grants and scholarships

There are thousands of scholarships available from schools, corporations, nonprofits, community organizations and other areas. Some are need-based while others are merit-based.

High school counselors, public libraries and college financial aid offices can be good sources of information about scholarship opportunities. The US Department of Labor also sponsors a scholarship search site.

Applying for aid

Many client's don't think they will qualify for financial aid and don't fill out the application. There are many resources you can guide them to to help them in the process.

Useful links

ed.gov/finaid.html Financial aid information from the U.S. Department of Education
fafsa.ed.gov Free application for Federal Student Aid, a part of the U.S. Department of Education
finaid.org A comprehensive source of student financial aid information, advice and tools
irs.gov/publications/p970/ IRS Publication 970, Tax Benefits for Education
collegesavings.org Source of information about Section 529 College Savings Plans and Prepaid Tuition Plans
savingforcollege.com Information on college savings with articles, calculators, 529 plan rankings, financial aid, scholarships
collegeconfidential.com Features college forum and resources for test prep, financial aid, admissions and other topics
iefa.org Resource for financial aid, scholarship and grant information for US and international students wishing to study abroad

Client education

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