How is retirement income and past due child support reported on the FAFSA?

How is retirement income and past due child support reported on the FAFSA?

I am trying to fill out my FAFSA. My father retired last year and I

am confused as to what to put for his financial answers, for example,

gross income, taxes, etc. Do I fill out a separate form because he is

retired? Will they know that he is retired? I am so lost and getting

frustrated. Please help!

— Alexa H.

You complete the FAFSA with your father’s actual income, as it will be

reported on his federal income tax return. Untaxed Social Security

benefits are not reported. Even though he is retired, he may still

have some taxable income, such as from retirement plan distributions,

interest and dividends. The FAFSA does not provide any special

treatment for parents who are retired, other than a higher asset

protection allowance for older parents. There are no separate forms

for retired people.

Note that while retirement funds are not reported as an asset on the

FAFSA, this exclusion is restricted to funds that are in qualified

retirement accounts like a pension fund, IRA, 401(k) or 403(b). Money

that is not in a qualified retirement account is still reported as an

asset, even if the parent is retired.

Colleges will generally not make an adjustment for a change in income

when someone retires because retirement is not considered an unusual

circumstance.

If your parents’ income is below $50,000 and certain other conditions

are met, assets will be disregarded entirely by the federal need

analysis methodology. If your parents’ income is below $30,000 and

certain other conditions are met, your expected family contribution

(EFC) will be automatically set to zero, entitling you to a full Pell

Grant.

I am a senior in high school and my parents have been divorced

since I was about 5 years old. My father was ordered to pay child

support, but he only paid every now and then. We are now going through

a child support service that retrieves past due child support. We have

not yet received any money but I was wondering whether it would affect

my student aid.

— Samantha W.

Only child support payments that were received, not owed, are

reported on the Free Application for Federal Student Aid (FAFSA). If

your FAFSA is selected for verification, the college will verify child

support received if the amount differs from the amount reported on the

previous year’s FAFSA. They may verify it by asking for a copy of the

separation agreement or divorce decree.

If you receive a lump sum payment for past due child support from

previous years, ask the college to use its professional judgment to

reduce the reported figure to the annual obligation. After all, such a

lump sum payment is not reflective of your ability to pay during the

award year, since it is a one time event.

Is it correct that before my son can apply for any scholarships we

have to fill out and submit the FAFSA first?

— Rachel C.

This is not correct. The FAFSA is used to apply for federal and state

student aid, as well as aid from all public colleges and most private

colleges. It is not used to apply for scholarships.

You should submit the FAFSA as soon as possible on or after October 1

because some states have very early deadlines for state grants, as

early as February or March. Students and their parents can use the prior prior year’s tax information to fill out the form.

Start searching for scholarships as soon as possible. Scholarships

have deadlines throughout the year. If you wait until you submit the

FAFSA, you’ll miss about half the scholarship deadlines. Also, you

don’t need to be a high school senior to apply for scholarships. There

are many scholarships that are open to high school students in grades

9-11 in addition to grade 12. There are even

scholarships for children in grades K-8.

There are also scholarships for current college students.

One of the benefits of the free Fastweb scholarship matching service

is that it automatically notifies you of new awards that match your

personal profile. New and updated scholarships are added to the

scholarship database every day. (It’s a good idea to review and update

your personal profile at least once a year to ensure that you match as

many scholarships as possible.)

Only a handful of scholarship programs ask for your EFC or a copy of your

financial aid award letter. In most cases these scholarship programs

will allow you to submit this information later.

Source: Fastweb

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