8 Mistakes to Avoid In Applying For College Financial Aid

1:56 PM, Jan 31, 2014   |    comments
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By: Lynn O'ShaughnessyMoneyWatch

(CBS News/MoneyWatch)-- College freshmen will be heading off to school in the fall, which means that some parents are making mistakes as they struggle to complete the Free Application for Federal Student Aid.

But a new guide written by Mark Kantrowitz, a nationally recognized financial aid expert, and David Levy, the former financial aid director at California Institute of Technology, can help you avoid such errors and make the entire process easier. You can download for the guide free on the Edvisors Network website.

What are the most common types of errors:

1. Sharing the wrong names. When completing the FAFSA, students and parents need to use the legal names that are on their Social Security cards. You can't use a nickname or an informal name. If a Social Security card uses a maiden name, the individual must use that name on the FAFSA. The financial aid application will not be processed if the names don't match up correctly.

2. Reporting the wrong tax figure. The FAFSA asks for a federal income tax figure from a specific line of the federal tax return. Do not report your adjusted gross income on the FAFSA. If you do, the application will be rejected.

3. Including retirement assets. When asked about the net worth of your investments, do not include the assets in your qualified retirement accounts such as Individual Retirement Accounts, 401(k), 403(b) and pension plans. Parents who mistakenly include these assets on the FAFSA can jeopardize their chances for need-based financial aid.

4. Reporting home equity. You should not include the equity of your primary house on the FAFSA. Rental property is normally reported at investment assets, not business assets, unless they are part of a formally recognized business.

5. Filing the wrong FAFSA. Depending on the time of year, two different FAFSAs may be available.  Currently, for instance, parents can file the 2013-2014 FAFSA or the 2014-2015 FAFSA. For students seeking aid in the fall, you want to complete the 2014-2015 FAFSA.

6. Failing to report the correct household size. If a step-parent has children from a previous marriage, those children should be counted in the household size if the stepparent provides more than half of their support and will continue to do so throughout the award year even if the children do not live with the stepparent.

7. Sharing the wrong marital status. You need to report your marital status as of the day you file the FAFSA, not the end of the calendar year. So if you were single on Dec. 31 but got married two months later, that's what you put on the application.

8. Not expressing an interest in a federal work-study job. Kantrowitz and Levy recommend that families always answer "yes" to the question about interest in a work-study campus job. The student can always decide later not to apply for one. At some campuses, all or most jobs are reserved for work-study students.

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