Welcome back to our second FAFSA FAQ video, in a three part series. And we’re really going to jump into more of the details here with Rob.
Michelle: So for the previous FAFSA FAQ discussion, we talked about who it was for and what it was. As a recap, it is student aid, and these could be grants or loans, for students who are nearing college, right?
Rob: Yes, or in college.
Michelle: OK perfect, so now let’s get let’s dig into more of the details. So with the FAFSA, do you want to explain, maybe what the expected family contribution is?
Expected Family Contribution
Rob: Sure, so the expected family contribution, when you fill out the FAFSA, you have to give your income and assets. And there’s a formula that the government has, that says that a family based on their income and assets, can reasonably afford to pay X amount of dollars to help their child go to college. So they not only look at the parent, but also the student as well. In terms of how much they make, and how much they have in assets.
Income & Assets
Michelle: Ok so, all of that contributes to how much they’re going to actually be able to get, I’m sure?
Rob: Right. So then what are some of the key factors, that we need to be thoughtful of. So there’s really two pieces to the formula: there’s an income and assets.
Income has a much bigger contribution to the expected family contribution or EFC for short. So the higher your income is, the higher your EFC will be.
Assets also, are included in that calculation, but at a much lower rate. So more like five or six percent of your assets, would be included in the expected family contribution.
Michelle: Ok so these are all good things that we need to be thoughtful of, even leading up to these years where we’re going to maybe be filing for student aid.
Grand Parent Contribution Trend
Rob: So then a special note here to grandparents– because you mentioned assets and income of the parents and their children, or the child is going to be going to college.
So with the cost of college these days, what we’re finding is a lot of grandparents are having to chip in, to help out their grand-kids to actually afford college.
And the way they’re doing that is, they open up 529 college savings accounts. Save up some money invest it, so that when their grand child goes to college there’s money there, to help them pay for it. But one key thing that grandparents need to realize is that, when they take money out of that 529 account, that money is actually going to count is income against the student borrower. So it’s really important for a grand parent to wait until the junior or senior year of college, to pull that money out to help pay for it. Because when you fill out the FAFSA, it looks at your income– not only the parent, but the student–looks at the income for two years prior then the school year they’re applying for.
Michelle: Ok so this is all really helpful, because regardless of whether they’re having to help pay for college– or even some grandparents just want to help pay for college– this all becomes a part of where can I start paying for college from. Do I use money we’ve saved, or can we actually get aid from the government, whether a grant or a loan. So this is really helpful to remember.
So we’ve got one more video after this, that is going to get us even closer to that filing date, that’s coming up. And walking you through all the details of FAFSA FAQ. Please keep following us, to learn about that one as well and view these helpful FAFSA resources below.
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