Earlier Isn't Always Better
Families are often advised by aid administrators and college planners to file their FAFSA (Free Application For Federal Student Aid) as early as possible. And that does make some sense…but not at the expense of aid dollars.
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John Pearson
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The EFC formula assesses income based on the prior year's income tax filing, and assets and liabilities as of the date of the signing of the form. Parents' eligible assets are generally "assessed" at a rate of about 5.6 percent using the federal formula.
So make sure you pay your big bills in January before signing your FAFSA. Many families have federal and state estimated tax payments, or property tax payments, or insurance premiums that are due then. Making those payments before FAFSA filing could provide hundreds or even thousands of financial aid dollars.
Asset Valuation in The Case of Divorce
Divorce proceedings are difficult enough without having to be concerned about how they all impact the assets that need to be listed on the FAFSA (Free Application For Federal Student Aid.)
So don't let the emotion packed arena of separation put you in a situation where you list an eligible asset and decrease your financial aid package.
An asset should not be reported if its ownership is being legally contested.
For instance, if parents are separated and they may not sell or borrow against jointly owned property that is being contested, the FAFSA information they report would not list any value for the property or any debts against it.
If ownership of the asset is resolved after the initial application is filed, they may not update this information.
Remember, eligible assets that don't have to be listed could create as much as 5.6 percent of their value in aid dollars.
John Pearson is a CPA and certified college planning specialist. He can be reached at john@johnpearsoncpa.com.