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When it comes to college financial aid, filing early isn’t always best

  • Parents and students may start filing their FAFSA forms for the 2018-19 school year on Sunday.
  • Although conventional wisdom says filing earlier is better, it can make sense to time your filing.

Great news for the super-organized: Starting Sunday, you can submit the Free Application for Federal Student Aid to start your financial aid process for the 2018-19 school year.

Conventional wisdom dictates that you should do so as soon as possible. Yet for some families, biding your time may boost aid dollars, said Kalman Chany, president of Campus Consultants Inc. and author of The Princeton Review's "Paying for College Without Going Broke." The 2018 edition was published Sept. 19.

"The big myth is that all aid is awarded on a first-come, first-serve basis, but for many types of aid it's not," Chany said. "Families should file the form when they're going to demonstrate the most eligibility for money."

Parents and students should first determine their earliest deadlines for filing for aid and whether their school or state uses a first-come, first-served system for any of its aid, Chany said. The federal FAFSA deadline for the 2018-19 school year isn't until June 30, 2019. But states and schools typically impose earlier deadlines. High school seniors should check deadlines for all schools they are considering.

At least 13 states, including Alaska, Illinois and Kentucky, have indicated they will be awarding funds on a first-come, first-served basis for the 2018-19 school year. Families who live in those states should file their FAFSA as soon as possible on or after Sunday. Some individual schools also award aid this way, but they are in the overwhelming minority, Chany said. (Check with your state aid administrator and with your school's aid office for the latest information on deadlines and how funds are allocated.)

"Most schools now set a priority filing deadline, and if you file by that date you're treated the same whether you filed months before or shortly before the deadline," he said.

"The biggest mistake that people make is not filling out the FAFSA, or filling it out late." -Karen McCarthy, National Association of Student Financial Aid Administrators.

Families who aren't under the gun to file quickly might be able to boost their chances by considering how their assets will be measured in aid calculations. For example, most types of debt, including credit-card debt, car loans and the mortgage on your primary residence, are not reported on FAFSA and so don't reduce your family's net worth in aid calculations.

That means it can make sense to accelerate debt payments before filing. (Equity in your primary residence isn't reported on FAFSA but may be considered by schools that use the CSS Profile form.)

Some families may benefit by sheltering after-tax dollars in retirement-savings vehicles, such as Roth individual retirement accounts and some types of annuities, said Will Alford, president of Education Planning Resources. Assets in retirement accounts are generally excluded from a family's net worth in aid calculations. However, accelerating contributions to pretax retirement accounts, such as 401(k)s, does not provide the same benefit since contributions lower parents' federal income tax liability, and higher taxes boost aid chances, Alford said.

Another possible reason for waiting is the roaring stock market, which could be due for a correction.

"If the stock market crashes after you've filed, you can't go back and change the value of your accounts on the form," Chany said. "FAFSA takes a snapshot of your assets on the date you file the form."

Of course, financial aid calculations are Byzantine and case-specific. If you're going to try to shuffle assets, you should first be sure you understand all the applicable rules and trade-offs.

Furthermore, shifting parental assets won't make a big difference unless you're looking at large sums, said Mark Kantrowitz, publisher and vice president of strategy for Cappex.com. An additional $100,000 in parental assets boosts parents' expected contribution by a maximum of $5,640, he said.

Don't delay filing if you're not on top of all relevant deadlines.

"The biggest mistake that people make is not filling out the FAFSA, or filling it out late," said Karen McCarthy, director of policy analysis for the National Association of Student Financial Aid Administrators.

Other top mistakes filers make are mixing up parent and student information on the form, such as entering a parent's Social Security number instead of the student's and entering a nickname instead an exact legal name, McCarthy said. Because such errors can delay processing, you should build in some buffer time before your earliest deadline.

"If you get it in a week before the priority filing deadline and there's an issue in getting processed, it could be that it doesn't get to the school until after their deadline," said Alford. "You don't want to wait until the last minute."