Jay Benanav Q and A: Financial Aid Issues for 2023 HS Graduates

College Inside Track founder and nationally recognized college admissions financial aid expert Jay Benanav discusses some of the most salient college financial aid issues relative to the 2022-2023 application cycle

 

Q: Jay, what is new and reportable in the 2022 landscape of financial aid?  What have we learned in the last application cycle? 

Even though many schools were test optional in the 2021-22 admissions cycle, not all of them were test optional for merit aid.  Families have to be aware of which schools are truly test optional for both admissions, and for merit money.

The later you get your forms completed and submitted, the longer you will wait to get your financial aid award.  Schools are expecting them much earlier than they used to.  We recommend that our clients have their CSS and FAFSA submitted to coincide with the first Early Action deadlines for their child, usually Nov 1.  In addition, they must check the financial aid page of every school on their child’s list, as colleges are increasingly requesting additional specific supporting financial documents, such as bank account statements.

Q: Clients are increasingly applying Early Decision.  Speak for a moment about financial aid and ED.

Ask your financial aid office to do an “early read” of what you will receive in the way of financial aid, if your student wants to apply ED.  Some colleges last year, like Case Western and Tulane, wrote to our students saying:  you have the best chance of admission if you switch your application to ED, but we will not predict merit aid for you. This is an enormously egregious consumer practice, like saying to somebody: If you want to buy this house then buy it, but we will not tell you how much it costs until after you own it.  Many of our parents were fairly offended by these letters.  

College cost calculators are notoriously inaccurate. The government says colleges have to have one, but that doesn’t mean it has to be a good one. If they are only asking your three or four questions, forget it.  The more questions they ask, the more accurate the prediction of aid.  I would call the school and say: this is the number I got from your net price calculator, is this an accurate number? Press them.

Q:  How should clients be working with their financial advisors right now?  What are the essential preparatory tasks?  I know that some families are worried about their 529s.

Grandparent contributions will no longer negatively affect merit aid, according to the new FAFSA rules. In the past, a grandparent contribution counted as income for the student; the student’s assets were considered higher.  That’s no longer the case.  In short, grandparent contributions do not have to be reported on either the FAFSA or the CSS profile.

If a student is a rising senior, will the market come back? Who knows. Talk to your advisor about the market, specific impacts on the 529, and discuss whether it makes sense to shift plans in terms of college financing arrangements.

Make sure that your 2021 taxes are filed, because that is what the FAFSA will look at. Have that ready to go by the beginning of October. For the CSS Profile, have all of your financial documents in hand, including: income tax form, 529 information, any other assets in savings or brokerage accounts – any assets with any cash; stocks, bonds. 

Q: Why do so many families have a problem figuring out how to use 529s? What is your one single best piece of advice for these families?

A: The rules are complicated, and there is a 10% penalty for making a certain kind of mistake. Not all college expenses can be paid for with the 529.   For example, if a student moves off campus and lives in an apartment – the 529 cannot be used to pay for the rent – you can only reimburse for what it would have cost to live on campus. And, some parents want to pay off a student loan with the 529 – but there is a 10k lifetime limit on that.

Q: Let’s talk about the upcoming change in FAFSA for families with more than one child in college.

For 2023 grads, there is no difference. You get a break for having more than one in college. That will change in 2024. Part of the problem is we don’t know how this is going to shake out. The FAFSA is a document colleges use as a starting point; it is not completely dispositive in terms of what your financial aid package will look like.  When you get your financial aid offer, it may be worth it to you to speak to financial aid at your college of choice, because every college may treat it differently. Each will take the new Student Aid Formula and work the numbers. 

Q:  Financial aid is currently calculated based on with whom the child spends the most time.  The new law states that financial aid will be calculated based on who provides the most financial support.  Should divorced parents prepare to provide proof of financial support?

The rules for this new law haven’t yet been written so it’s unclear what “providing the most financial support” means. It may include the value the student received by living in a parent’s house, meals and other typical expenses of raising a child. It likely will include the child support a parent pays. My advice is to keep records whenever possible and compare the cost to the amount of financial support the other parent provides. BUT, stay tuned for the rules as they are released.

Q: Moving on to financial aid applications:  let’s begin with the most mundane of questions: who should file the FAFSA and the CSS Profile?

A: These forms belong to the student, not the parent, though adults often fill out the forms on the student’s behalf. Not all schools require the CSS Profile, so the first job is to determine that. CSS Profile Participating Institutions and Programs

The question is not all that mundane.  Some people are resistant to the forms, the completion of which they may experience as invasive at worst or unnecessary at best.  There may be so much emotion around financial aid in some families that these forms can become a real roadblock to securing aid.

In terms of the FAFSA, what I tell families is that many schools don’t require either form for merit aid, but unless you know that for sure: do it.  Do the forms, so that you don’t miss out on merit aid.  For families who do not qualify for need-based aid but want to take advantage of the federal student loan program, the FAFSA must be filed.

Q: Some families just don’t want to do the forms.

A: We always have some families who decline to fill out the forms for one reason or another, and that decision has no impact on the admissions decisions; but they have to accept the idea that it might very well impact their child’s merit awards, and perhaps dramatically impact them. At least one school declined to give at least one of our families a penny last year, because the family would not fill out the FAFSA.   That was fine with the family.  If that is fine with yours:  ignore the financial aid forms.

Q: Some families with considerable financial means wonder if their child has a better chance at a highly selective school if – in addition to qualifying for no need-based aid- the family makes clear that they will not require merit aid. Does not asking for money of any kind increase the chances of admission? 

At most schools, the answer is yes. Not many colleges are need blind. You are a full pay student? That fact will likely increase your chances.  Colleges are businesses.  

Q: What is the relationship between need based aid and the FAFSA?

A: In order to receive any need-based aid from the college or the government – which includes the federal loan – the FAFSA has to be filed. In addition – and we found this last year – some schools, if you don’t file the FAFSA the first year, in subsequent years if you lose your job and you haven’t filed the FAFSA you are not eligible for need based aid in subsequent years.

Q: How does this affect how you advise your student clients when you are reviewing individual applications with them? How should they respond to questions regarding financial aid on the Common App, for example?

A: The Common Application may well ask the student: are you applying for need based aid. Some schools also ask if the student will apply for merit aid.   So it is important to understand the difference.

In order to receive the best merit aid, the student generally has to be in the top quarter of the applicant class. Parents have to be aware that it isn’t only getting in to the school that counts; for strong merit aid, the top quarter is the sweet spot.

Q: Any tips for making completion of the forms easier?

A: Sure. Select the IRS Data Retrieval Tool when given the option (DRT).  This tool automatically populates many of the FAFSA’s questions directly from the federal tax return, making completion much simpler.  These populated fields are shielded from the filer, though college financial aid offices will be able to see the numbers.

Q: What else should parents know about the IRS tool?

A: If they don’t select the DRT for whatever reason, financial aid offices will likely request further verification from the filer that the numbers they have entered agree with their tax returns.

Q: Some of our families with very substantial financial resources hesitate to apply for need based aid. Many clients come to us with well-funded 529s and ask: Should we still fill out FAFSA and check the YES box to both need based and merit aid?  What do you say to those families?

A: What I tell them is if they are absolutely certain that they don’t want to take advantage of the federal loan, or that they will not require need-based aid in the future – don’t apply for need-based aid. But if you need or want to protect your child’s future in case of an unknown whack to your family’s financial situation:  apply for it, even though we know you won’t get it right now.

Somebody is furloughed, death in the family, change in fortunes – say a pandemic occurs and your money situation changes in ways you might never have anticipated when you were at the top of your game.  Dramatic changes happen in this life, unreimbursed and unexpected catastrophic health care costs happen. Sometimes, they happen in our families. So I say: Think about these issues carefully, then make your decision.

Q: And don’t feel embarrassed about applying, irrespective of your current financial picture.

A: Exactly. Understand the potential consequences.

Q: Thank you Jay!

A: My pleasure.

College Inside Track team (missing Susan W) at our most recent quarterly meeting; Lucy and Jay Benanav celebrate 47 years of marriage at their summer home on Anna Maria Island.