Paying for college – whether it’s your own or your children’s – will likely rank as one of your life’s biggest expenses, and biggest debts to pay back. Over 63% of students take out some form of financial aid, according to the Department of Education. But do you know everything there is to know about the process?
Carmen spoke with Larry Burt, the former director of financial aid for the University of Texas at Austin, about the do’s and don’ts of applying for loans and the secrets to getting the most aid available.
The real key that opens the vault of student aid is FAFSA – the Free Application for Federal Student Aid. This is the form that you fill out that colleges use to determine how much aid you’re eligble for. There’s some tips and tricks to filling out this form, Burt said.
-If you’re a parent and you have money saved up for your child’s education, do not put that money in their name. If it’s in their name, it can be taxed at a whopping 20% rate. If it’s in your name, it can only be taxed at a rate of 5.6%.
-Many parents take out money from their children’s college savings accounts and use it to pre-pay expenses like tuitions, room and board and fees. If you do this, make sure you do it before you fill out FAFSA.
-Take your time! Burt has seen a ton of mistakes on these forms that have cost people money. Treat it like your taxes, go over each answer and make sure it’s all correct before sending it in.
Finally, be aware that big schools rely on computers to audit their FAFSA forms and decide on aid amounts. Smaller schools have more power on deciding who gets grant money because the systems are typically not automated.
Burt also noted that the financial aid office at any college has a great, simple tool: professional judgment. If you can’t pay a loan back in its entirety or if you need more aid unexpectedly, you can walk into the financial aid office, explain your situation and the officer can make the call, he advised. Nothing is written in stone that says they can’t be flexible if you need help.