[Video] FAFSA FAQ #1: What Is It & Is It Worth Filling Out?
MICHELLE SMALENBERGER, CFP ® & ROBERT STOLL, CFA, CFP ®
So if you have kids who are nearing college age, or in college, you’re probably familiar with some of these acronyms or buzzwords: FAFSA and what it is.
So we’re going to touch on what it is, who it’s for, and is it even worth filling out.
Michelle: So we’ve got Rob here today, who’s going to explain all things FAFSA to us and get us started, because he is the expert in this. So, Rob can you tell us first, what is FAFSA?
What Is FAFSA?
Rob: So FAFSA means, “Free Application for Federal StudentAid.” So as the name implies, you need to fill out this application, in order to get merit based scholarships and also to get federal student loans.
Michelle: Ok so who is this for?
Who Is FAFSA For?
Rob: So the FAFSA is for any inbound college student. So if you’re a family sending your son or daughter to college for the first time, you’ll definitely want to fill it out. But you fill it out each of the four years, that they’re going to be in college. It’s also for independent students, so if the student lives on their own and does not depend on their parents, they need to also fill out the FAFSA.
Michelle: OK so that’s really helpful. Now I know who it’s for, and if that affects me or my student. Now would you say that it’s worth filling out –you mentioned every year– is it worth filling out?
Is FAFSA Worth Filling Out?
Rob: Yeah it definitely is. A lot of high income families believe that they make too much money to get any sort of financial aid at all, and they end up not filling out the FAFSA at all. But the thing is a lot of colleges will offer merit based scholarships, and other scholarships to students. But unless you filled out theFAFSA form, they’re not going to give you any of that money.
Rob Stoll Introduction: Highest Investment Designation
Michelle: It’s my pleasure to introduce to you Rob Stoll, who’s a friend and colleague. And he’s also very experienced in investing.
Rob is a CFA, a chartered financial analyst. And basically this is the highest designation, that you can get in the investing world. So we thought it would be great to get Rob’s opinion on something that’s coming up, it’s very timely. And that is the interest rate changes that the Fed might be making, coming up in the next week
So a popular topic in the investing world, has been interest rates. Especially because they’ve been changing over the past couple of years. And there’s been a lot of speculation about will interest rates be cut in the coming week, or won’t they?
So Rob can you just catch us up. What’s been happening with interest rates recently?
Rob: Sure Michelle. Yeah there’s actually been a very big change, in terms of the thinking of the Federal Reserve. If you flip back to last year in 2018, they actually hiked rates four times. And going into this year, we’re talking about hiking rates another two or three times
Michelle: Wow. So, what we see, is that they cut rates for the first time, since the financial crisis.
Rob: Ok, and interest rates affect so much of our borrowing. So whether it’s a mortgage, whether it’s student loan debt, even interest savings –so what we have in a savings account.
Michelle: Right. Ok, so why do you think that the Fed changed its stance so quickly?
Rob: A couple of reasons. I mean number one, there’s been a lot of trade talk. These trade wars with China, and how that’s going to resolve. And whether that’s going to actually cause some economic slowdown. We also actually have seen a slowdown in economic numbers. So we had a big burst last year after the tax cuts. But both employment and manufacturing have slowed down a little bit. Mostly I think what the Fed is trying to do, is get ahead of any slowdown.
So in the past what the Fed would do, is usually react. So after the economy was already in recession, they would start cutting rates. I think with the new Fed chairman, whether he really wants to do is try to get ahead of that.
So what they’re probably going to do is cut rates, to prevent a slow down from happening in the first place.
Michelle: So the last thing he wants to be known as, is the person who caused something to happen. Some growth to stop because rates weren’t cut right?
Rob: Exactly. The Fed has been accused in the past, of being too slow to react to economic slowdown.
Michelle: So this is really timely to be aware of, because these changes could affect a lot of things for our clients. What are some things, what are some ways that this does impact them?
Rob: With the big change in thinking, from hiking rates to cutting rates, we’ve seen a big rally in bonds this year. So the aggregate U.S. bond index, has actually increased 6 percent in the first six months of the year. Which is a really good return.
And we’ve also seen the stock market surge to all time highs. So what the market is basically hoping, is that by cutting rates, they can get ahead of any economic slowdown and then we can start growing again next year.
Michelle: Yeah that’s great. Hopefully this is really helpful, just for you to understand– when we hear in the news a lot of times that the Fed’s doing this or that– sometimes these things just don’t make sense, if you don’t follow investments all the time. Or just even understand how they impact us. So hopefully this is helpful, just for you to understand what’s coming up. And some changes that it might impact your finances.
So we’re going to be following up with a couple more videos, over the next couple of weeks, with all the details about FAFSA, before it’s time to start filing. So please pay attention to those. Thank you Rob for explaining this and we’ll dig in deeper over the next couple of weeks.
Additionally, here are some helpful FAFSA resources for you to access!