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My daughter got accepted to her first-choice school, a private
university, as an early-decision candidate. The school won't be able
to tell us the amount of financial aid she will be offered until
March. I am eager to file the FAFSA and CSS Financial Aid PROFILE
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forms as soon as possible, as I've heard this helps maximize the
amount of aid a student can be considered for. (The reasoning is that
the longer you wait, the less available aid there will be.) The FAFSA
is available online starting today, January 1. I already created an
account and have my pin. Does it make sense for me to begin filling it
out using my tax info from the year before (and then make any
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adjustments later), or should I wait until I receive this year's W-2
forms? I work at a nonprofit and make a low salary, which is
strengthened by child support. I don't expect a radical difference
between last year's and this year's income tax returns.
— Gwen I.
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Congratulations on your daughter's accomplishments. She must be very
excited to have been accepted by her first-choice college.
Do
not wait to file the financial aid application forms. Some
families make the mistake of waiting until they receive W-2 forms,
prepare their federal income tax returns or are admitted to apply for
financial aid. But by then they may have waited too long to receive
some forms of financial aid.
File the Free Application for Federal Student Aid (FAFSA) as soon as
possible after January 1 of the student's senior year in high school
and each subsequent year. The FAFSA is the gateway to financial aid
from the federal and state governments and most colleges and
universities.
While the federal government allows students to qualify for aid even
as late as the end of the academic year, some states have much earlier
deadlines for students who wish to qualify for state grants. Two
states, Oregon and Connecticut, have deadlines in February and about a
dozen states have deadlines in March. Six states award state grants on
a first-come, first-served basis until the money runs out. Some
colleges have two deadlines, with less money available to students who
do not apply by the first "priority" deadline. Private scholarships
that consider financial need may require applicants to file the FAFSA
early.
But applicants might not have all the information they need to file
the FAFSA by these early deadlines.
Officially, employers must mail IRS Form W-2 and businesses must mail
IRS Form 1099 by January 31. But some brokerages don't mail 1099s
until mid-February, especially if the brokerage account includes
mutual funds, foreign stocks and real estate investment
trusts. Practically speaking, most taxpayers won't receive all of
their forms until mid-February and some not until the end of
February. This makes it difficult for families to prepare their
federal income tax returns before filing the FAFSA.
Instead, it is ok to file the FAFSA based on estimated income and tax
information. There will be an opportunity to correct any errors and
update the information later. In fact, the FAFSA form asks whether the
applicant (and parents) have already filed or will file their federal
income tax returns so that the US Department of Education can email
reminders to update the FAFSA after the April 15 deadline for filing a
federal income tax return.
To estimate income for the previous year, start with the last pay
stub of the year and the year-end bank and brokerage account
statements. Also use any W-2 and 1099 forms that have already been
received. Compare this information with the federal income tax returns
you filed last year to make sure to include all important types of
income, including interest and dividend income, capital gains,
self-employment income and alimony. (The FAFSA refers to specific line
numbers of the current year's federal income tax returns. These line
numbers may have changed from the previous year's federal income tax
return, so be careful when comparing income information with the
previous year's federal income tax returns.)
Try to estimate income as accurately as possible, since every
$10,000 difference in income can lead to about a $3,000 difference in
the Expected Family Contribution (EFC).
After the federal income tax returns have been filed, update the FAFSA
with the actual figures from the income tax returns. It is not
necessary to wait until the US Department of Education emails a
reminder to update the FAFSA. If possible, use the
IRS Data Retrieval Tool
to update the information, since this will save time and reduce
the likelihood the FAFSA will be selected for verification.
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