Families have a tendency to underestimate their eligibility for need-based financial aid for college. Many wealthy parents, in particular, wonder whether it's worthwhile to apply for financial aid. Financial aid expert Mark Kantrowicz suggests that unless:
• the parents earn more than $350,000 annually,
• and they have more than $1 million in reportable assets,
• and they have only one child in college,
• and that child is enrolled in a public college,
then it's still advisable for parents to file the Free Application for Federal Student Aid (FAFSA) form. Moreover, since small changes in financial circumstances may have a big impact on financial aid awards, the FAFSA should be completed every year, even if no awards were received in the prior year.
And there are other benefits to filing the FAFSA beyond the possibility of receiving financial aid:
1. Many schools won't consider students for merit-based grants and scholarships unless a FAFSA is filed.
2. The FAFSA is a prerequisite for receiving Federal Stafford and Federal PLUS student loans. These are loan types that are available without regard to financial need.
3. For the most wealthy families, those for whom need-based financial aid is out of the question, completing the FAFSA is a way to show prospective colleges your ability to pay without help. This can make your student more attractive as an admissions candidate.
About the Author
Paul Winter, MBA, CFA, CFP® is a Fee-Only financial advisor and fiduciary in Salt Lake City, UT. His independent wealth management firm, Five Seasons Financial Planning, provides professional portfolio management and objective financial planning services to individuals and families, and to their related entities including trusts, estates, charitable organizations, and small businesses.