Episode #88: Top Mistakes Families Make When Filing the FAFSA

Episode #88: Top Mistakes Families Make When Filing the FAFSA


With more than 100 questions about your family’s financial situation, the Free Application for Federal Student Aid, or FAFSA, can feel overwhelming. One minor mistake could disqualify you from potentially receiving thousands of dollars in grants and scholarships for college.

In this episode of Money Script Monday, Gabriel addresses the eight most common FAFSA mistakes and how to avoid them.


 

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Video transcription

Welcome back to another episode of “Money Script Monday.” My name is Gabriel Lindemann and I'm honored to be your host.

Today, we're going to be talking about the top mistakes families make when filing the FAFSA form.

We've been doing this for a long time and families make hundreds of mistakes, but we're going to go over the top eight mistakes we see more frequently than others.

With that in mind, let's get started.

Top 8 FAFSA Mistakes

8 top fafsa mistakes

#8: Not substituting for most recent year.

Family situations and families change all the time. Last year and this year probably aren’t the same.

On the FAFSA data retrieval, you can pull back two years. A lot of people do it because it's easier and they don't want to fill out the numbers.

But I'm going to tell you right now, in a lot of situations, that could really hurt you.

You're better off inputting the data yourself so it can be a more accurate picture instead of relying on old information the IRS might not have reported correctly.

With that being said, you need to really make the effort to put the time in there to put your information so that the FAFSA is correct based on your situation.

Don't rely on them pulling the information for you because that could be the difference of losing $10,000 to $20,000 of financial aid.

#7: Using same information as CSS Profile.

The CSS Profile is used for the top private schools in the country. There is a couple of FAFSA schools, state schools, UC schools that use it, but a very small amount.

They use a different criteria than the FAFSA.

Every school requires a FAFSA.

The biggest mistake you can is assuming that the Profile and the FAFSA are the same.

Totally different requirements than what they look at on assets and everything. Make sure it's different.

This is one of the benefits of hiring a real college planner because they're going to know the difference. They're not going to make that mistake which could cost you thousands of dollars in financial aid.

#6: Not accounting for divorce or separation.

Divorce rates aren't going down.

With that being said, divorce is horrible and it's a tragedy, but it can be beneficial for college planning because of your financial information.

Too often than not, if you do the data retrieval, it doesn't show what it was two years ago versus this year and vice versa. So, you're better off to input it.

It's a difference of having a family income of $200,000 or $300,000. A divorce has happened and maybe the primary person taking care of the student is only making $125,000. This now makes them grant eligible as compared to originally not being grant eligible.

Again, you wouldn't know this unless you were working with a college planner because it's not listed on the FAFSA instructions.

These are little tips that a college planner will be able to customize for you.

#5: Listing income in wrong area.

This is a common mistake.

Let's say a family makes $125,000 of combined household income. Then, there's another section talking about income again. They think, "Okay. You just put it in there again."

Now you have a family that only makes $125,000, but they made a mistake and now they put $125,000 in two spots.

It's now combined to $250,000.

You just went from being grant eligible to not financial aid eligible because of that one little mistake.

And, again, it's not intentional. You just didn't read it right. You didn't understand it.

But working with a certified college planner, they're not going to make that mistake. They're going to make sure it’s customized to your family for your situation.

#4: Overvaluing own business.

This happens a lot. I see this a lot with families that have restaurants, financial planners, and even small businesses.

Now, small is relative. Small is considered 100 or less.

And so, if you're under 100 or less for your own business, you don't have to list that income.

But it happens a lot. People don't realize that.

And so, they'll take their income of their business - which they think it might be worth $2 or $3 million.

Again, you went from what you are able to report to get financial aid to reporting your business income. And now you're not receiving financial aid because you didn't have 100 employees.

It's a simple trick, but you know what? A lot of people don't realize this and it costs them thousands of dollars in award.

#3: Listing assets inappropriately.

This is probably one of the biggest mistakes.

People don't realize that some assets count and some assets don't.

It's no difference from putting money in one pocket and moving it into the other pocket. They're both your assets.

But the FAFSA recognizes some assets that they expect you to use for school and some assets they don't.

As my old man used to say, "You know, Gabe, you don't know what you don't know."

This is one of the benefits of hiring a college planner because they do know. They know which assets the best ones are.

They know which one to move from your left pocket to your right pocket. That way your financial aid eligibility goes up quite a bit.

#2: Filing late.

This a big common mistake.

People just don't know the deadlines.

Every state has their own deadline.

You need to know that.

Now, life is tough. We get busy. Kids are going crazy just trying to figure out the school.

Life happens. But colleges look at everything as a business.

You want to be 100% correct 100% of the time. You want to look the best so that way you can get into the school and get a great award package.

I know there is a process you can appeal, but why go through that nightmare? You're already dealing with enough stress.

Do it right the first time. Do it right completely the first time.

Make sure it looks perfect, so that way, they'll pick you.

They'll pick your student and your family to make sure that you get accepted, but you also get the best award packages.

#1: Not filing at all.

Lastly, not filing it at all.

Too often, families think that they make too much money.

I can't tell you how many families we deal with that make $150,000, $175,000, even $200,000 and above. Just making a couple of little minor tweaks, which they didn't know about, makes them financially eligible.

And a lot of them get pretty good packages.

I think there is a study that came out about two years ago. Harvard Review said that, in California, 40% of families that were eligible to receive financial aid didn't apply because they thought they made too much money.

That is literally millions of dollars of financial aid that’s out there that government wants to give out to families so that they can go to school, but they don't realize that they qualify for it.

That's a huge mistake.

Hire a College Planner

These are the top eight most common mistakes.

Every family's different. Eight might not apply to you. Maybe four or five apply to you.

The fact is, we don't know.

college planner

But when you work with a college planner, they're going to customize a plan to make sure that you can get into college.

You can make it affordable.

And when you file it, you're not making mistakes, so you have the best eligibility and opportunity to get as much free money as possible.

This is all because you hired a real certified college planner.

Good luck with the college application season! Thank you.

About Gabe Lindemann

Gabe Lindemann is the Director of College Planning and Senior Field Support Representative at LifePro. He coaches hundreds of financial professionals on how to build effective financial strategies that achieve their clients' long term goals and helps them stay educated on the latest industry trends.

Disclaimer

This information is meant for educational purposes only.

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