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Eight Financial Aid Myths

Do you have a child going off to college next fall? The federal government's financial aid application (the FAFSA, which stands for Free Application for Federal Student Aid) is due as soon as possible after January 1, 2011. Here are some common myths about financial aid eligibility.

Myth #1: My child won't qualify for aid because our family makes too much money

Fact: While it's true that family income is the main factor that determines aid eligibility, it's not the only factor. The size of your family, the age of the older parent, and the number of kids you'll have in college at the same time all play into the equation. Even if you think your child won't qualify, you won't know for sure unless you apply, and it costs nothing to file the FAFSA. Besides, states and colleges typically require the FAFSA--in addition to any state and college specific forms--before they'll hand out their own aid.

Myth #2: The form is too hard to fill out

Fact: Years ago, the FAFSA was cumbersome to fill out. But ever since it went online at www.fafsa.ed.gov, it's easier than ever to submit. The online version has detailed instructions and takes you through step by step, asking only the questions that apply to you. If you need help, there are customer service representatives standing by with whom you can chat online. There is also a toll-free number you can call with questions: 1-800-4-FED-AID. All advice is free. Once you submit the form, it only takes about a week to process (compared to four to six weeks for a paper FAFSA).

Myth #3: If my child applies to a more expensive school, we'll get more aid

Fact: Not necessarily. The federal government determines your expected family contribution, or EFC, based on the income and asset information you provide on the FAFSA. Your EFC stays the same, no matter what school your child applies to. The difference between the cost of a particular college and your EFC is your child's financial need. The more expensive the college, the greater your child's financial need. But a greater financial need doesn't automatically translate into a bigger financial aid package. Colleges aren't obligated to meet 100% of your child's financial need (if they don't, you've been "gapped" in college parlance). Keep in mind, too, that there are annual borrowing limits on federal Stafford and Perkins Loans. Once your child has borrowed the maximum amount for the year, his or her only chance for more aid has to come from grants, scholarships, and/or work-study jobs.

Myth #4: My child probably won't qualify for aid because of mediocre grades

Fact: The federal government does not take grades into account when determining aid eligibility. However, colleges will consider a strong academic record when awarding certain merit scholarships.

Myth #5: A minority student has a better chance of getting aid

Fact: The federal government does not consider race when determining aid eligibility. It does not collect this type of information.

Myth #6: I lost my job shortly after I filed the FAFSA, but there's nothing I can do about it now

Fact: If your financial circumstances change after you file the FAFSA, you can ask the financial aid officer at your child's school to revisit your aid package; the officer has the authority to make adjustments if there have been material changes to your family's income or assets. If you have a material change that you can support with documentation, politely request a "professional judgment review" in a letter addressed to the financial aid officer. There are no guarantees, but you won't know if you don't ask.

Myth #7: We own our home, so my child won't qualify for aid

Fact: The federal formula for determining aid does not take home equity into account (it also excludes retirement accounts, cash value life insurance, and annuities from consideration). However, colleges typically consider home equity when distributing their own institutional aid.

Myth #8: Our smart/athletic/talented child will likely get a scholarship to cover most, if not all, college costs

Fact: A vast majority of financial aid officers believe that parents overestimate the amount of scholarship and grant money their children will receive. While it's true that some students end up getting a free ride (or close to it), they're in the minority. Scholarships can fill the gap, but they probably shouldn't be relied on as the main funding source.