My DD submitted applications stating that we would be seeking FA. Our family has a complex tax situation, so filing the FAFSA is not an easy thing to do. I have run multiple NPC as well as the test FAFSA on line and I know that the resulting EFC is larger than we are willing to pay. I told my DD last night that I did not want to submit the FAFSA because I already know that we might get some FA from some universities but we are not willing to pay up to the expected EFC. She needs to get the merit scholarships or she won’t be going to those colleges. My assumption is that merit scholarships reduce need assistance and not EFC.
My DD said multiple friends are having their admissions held up until the FAFSA is filed. I’m assuming that is because they applied stating they would need FA and their packets won’t be released until the FA package is complete?
My question is - do I need to file a FAFSA because my D said we were seeking FA?
I believe the FAFSA is required to be filed if you want ANY kind of non-merit based money, including student loans. How much you “want to pay” is irrelevant in this situation - FAFSA doesn’t care, nor do the schools.
Of course no one (but a family court judge) can make you pay ANYTHING, however, the FAFSA establishes a baseline financial situation for the schools to use, with the same information from every student/family, and this is used to determine the “Expected” family contribution. We laughed and laughed at how much the government “Expected” us to be able to pay, and we told our student the Actual amount we could contribute. It sounds like you have done the same, but you still need to do the FAFSA so she can get loans and any need based aid (which it doesn’t sound like she’ll get). If you were going to just pay the bill outright, can get her private loans etc, then you might be able to avoid it, but unless you won the Powerball last night, you sound like you are right there with the rest of us.
Well, I did discuss the loan situation with her and told her if she wanted to take responsibility for the loan of $27,000 for the 4 years, I would file the FAFSA. Her response was no thanks, no loans, which is fine with me. She has several options already including a full ride opportunity and several that we are willing to pay fully for. It is just a couple of reach schools that she needs a lot of merit for. I’m thinking I’ll fill out the FAFSA just in case the $27,000 would make the difference between her going to her dream school or not. I’m hoping she sees the value of the full ride because she would walk away with money in her pocket. Thanks for all the responses.
My kids went into college with the ‘no loans, ever’ attitude (which they got from me). We made it through the first year with no loans, but sophomore year they each had to take the subsidized student loans. We don’t pay interest on them until they leave school, and the hope is that I can just pay them off in a lump sum before the interest starts, but it’s nice to have that cushion. We needed the money, I was happy to have filed FAFSA and have the option even though it wasn’t in the plan.
A little warning about ‘full ride.’ Usually, not everything is covered. Transportation, sometimes books, extra spending money, health insurance. It adds up. And then there are the taxes. One of my kids has tuition, fees, room and board covered through FA and scholarships. Great! All the other expenses can be covered by the small student loan or by me (but they do add up to several thousand dollars a year). She doesn’t/can’t really work during school because she’s an athlete and that’s her ‘job.’ She’s going to be paying taxes on all that room and board, about $15,000, so will have a tax bill of $1000+. Absolutely still a great deal, but not totally free. Your daughter would pay taxes on her excess scholarship money, including any used for room and board, at YOUR tax rate. Mine in low, but it sounds like yours is higher (if you don’t qualify for need based aid). Just a caution. No free lunch from the IRS. No free room either.
You also need to file FAFSA if she wants Work Study. Some schools give a bonus for filing too and a few require it even for merit money. You have to check with each school.
@twoinanddone , I did know that we would have to pay taxes on the room and board, but I am surprised that it is considered income for the parents and not the student? I have another older DD on a full tuition plus scholarship and there is a slight overage that is considered taxable. I’ve always included that on her tax return not mine. Have I been doing that wrong?
You don’t have to file FAFSA now, even if your child needs a Direct Loan to cover a gap. You can do that this summer. The FA deadlines that schools put up don’t apply to fed Direct Loans. In fact, you could submit FAFSA during her frosh spring semester and get it then.
You’re talking about the kiddie tax (IRS Form 8615). Excess scholarship money may be taxed at the parent highest marginal rate, depending on how much there is.
So, if you do get a full ride that includes $10,000+ for room and board, because it is greater than $2100, it would be taxable at the parent’s rate. I am assuming that is the parent’s highest marginal rate, so it could be as high as 39%? Would this income be included on the parents’ return and excluded from the student’s return?
No, the student still has to report the incomes on his/her returns and use F8615 to figure the parents’ highest marginal rate (ordinary and capital gain), and applies these rate to the “unearned incomes”.
Also, I will check with the schools as far as filling out FAFSA and CSS. I might as well start accumulating all the data Again thanks for all the feedback.
Some colleges REQUIRE freshman applicants to fill out FAFSA, in order to be eligible for FA in the FUTURE.
So just inccase lightning strikes, or God forbid, something happens and your DD DOES need FA in order to graduate, you should just plan on submitting it now , just to be on the safe side.
You dont want to be kicking yourself 3 years from now cause you didnt fill it out this year.
Yes, I meant it is student income but taxed at the parent’s rate after the personal exemption. My daughter has no money so I’ll have to pay the taxes.
The school doesn’t have to ‘throw’ the money at you very hard for it to hurt to pay the taxes on in. My daughter’s school overcharges for room and board (a lot) and you think ‘what’s the big deal, it’s free money, who cares what they charge because you’re not paying anything.’ Except that she’s taxed on it. Her sister’s room and board was about $8200 her first year, and this child’s about $13,500 for about the same thing (dorm, food). Of course, the taxed one is the $13,500, and this year I think it is about $14,200. If the student has any summer earnings or even school term earnings, that exemption gets used up fast. It wouldn’t be as bad if this was NYC or LA, but it’s a small town in Florida, cost of living is low and these are not luxury dorms. Kids rent apartments in the area for about half of what the dorms cost. Food was okay but as with most kids, mine was tired of it by the end of the first semester, and started eating off campus a lot during the second semester so did not eat $3000 worth of food. She still has to pay taxes on it. Why does the school charge so much? A lot of foreign students who pay full price, so IMO the school inflates the costs and then gives scholarships to make it affordable while collecting in full from some. The squeeze is the taxes.