College students whose parents have lost their jobs could be facing more pain next year.
That's because their financial aid packages could fall far short of what they need to cover the cost of their education.
On Oct. 1, students can start filling out the Free Application for Federal Student Aid for the 2021-22 school year. This way, they're able to put themselves in the running for federal loans, grants and work-study opportunities.
The problem is that help for the 2021-22 school year will be based on families' 2019 income tax returns.
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Those figures could be significantly rosier than the reality so many people are facing today: Millions are unemployed, with more than 1.1 million applying for jobless benefits for the week ending Aug. 15. Further, the $600 enhanced federal unemployment benefit that kept many families afloat has ended.
Students get a substantial amount of money in federal aid. In the 2018-19 school year, full-time undergraduate students received an average of $9,520 in grant aid, $4,410 in federal loans and $1,280 in other aid, according to the College Board.
A smaller aid package would only subject families to even more strain.
"Huge swathes of the workforce, including parents of the individuals who will file a FAFSA, could be partially or fully unemployed," said Sean Stein Smith, CPA and member of the American Institute of CPAs' consumer financial education advocates.
Students need to be ready to file an appeal with their college and ask for more aid — at least enough to properly reflect the change in household finances, he said.
"If you're aware of the fact that you'll need more aid, taking into account that there will be quite a few individuals going through the process, getting there early is the best way to go," said Stein.
The appeals process
Though students need to file a FAFSA to become eligible for aid, the process of filing an appeal will involve the school and its financial aid office.
"The college has the authority to make changes [to the financial aid package] when it's supported by adequate documentation," said Mark Kantrowitz, publisher of SavingForCollege.com.
In that case, you would contact the college to start the process. Some have their students appeal with a form, while others require a letter.
Either way, be prepared with copies of the relevant documents to back up your case.
This could be a notice from the unemployment office, showing receipt of benefits, or a termination letter from a former employer. If your family incurred steep unreimbursed medical expenses this year, further hindering your ability to pay for college, bring copies of the bills and show that you paid copays and deductibles, said Kantrowitz.
"Be specific about the dates and the amounts, state what date you lost your job and how much of a difference it makes in your pay," he said.
Since millions of families are grappling with financial difficulties, it helps to apply for aid early and start the dialogue with your school as soon as you can.
"Be patient but be persistent, because sometimes schools will say they don't start taking appeals until Dec. 1 or January," said Joseph Messinger, co-founder of Capstone Wealth Partners in Dublin, Ohio.
If you're going to be in Mom and Dad's basement, do it for a third of the money, but make sure the credit transfers.Joseph Messingerco-founder of Capstone Wealth Partners
"Put yourself in front of the line by saying, 'If we need to report additional things, what do you need from us?'" he said.
Freshmen who were aggressively recruited might have an advantage if they can find someone to advocate for them at the school, said Messinger.
The other reason why it's important for students to act quickly is that colleges themselves are facing financial difficulties.
Public colleges depend on funding from their states, which are currently looking at a big decline in tax revenue.
"Many colleges are going to be under pressure, and their costs don't necessarily go down," said Kantrowitz.
With out-of-state students wanting to stay close to home and international students getting tangled in red tape, colleges' budgets will take a hit, he said.
Gear up in advance
Take the next couple of weeks to gather the necessary documentation you'll need to make an appeal to your financial aid office.
In the meantime, families may want to look at a few other options.
For instance, some newly minted high school graduates are considering a gap year or deferring enrollment.
Distance learning through a community college might also be an option, provided that your school will accept the credit.
"If you're going to be in Mom and Dad's basement, do it for a third of the money, but make sure the credit transfers," said Messinger.
