How can junior high school families prepare for financial aid?
Current junior families will be able to begin filling out the financial aid forms (most commonly the FAFSA and the CSS Profile) on October 1 of 2021.
These financial aid forms will use 2020 as the base year, meaning you’ll mostly be using your 2020 taxes to complete the forms. Since we’re still in 2020 and have yet to file taxes for the year, there is still time to prepare.
The overall goal related to financial aid and taxes is to show as little income as possible. There is more flexibility for some (business owners) than others (W-2 employees).
If possible, avoid situations that inflate your income for the 2020 tax year (capital gains, cashing out retirement account funds, etc.).
If parents are business owners, they can speak with their tax professionals about ways to reduce the income they show for the 2020 tax year.
For assets, it’s preferable to have assets in the parent’s name versus the student’s name.
If you do have assets (savings or investments) in the student’s name and also have expenses related to the student that are upcoming, you could spend down assets in the student’s name ahead of filling out the financial aid forms to improve your position for need-based financial aid.
Overall Planning & Expectation Settings
It’s good to get a sense of what your family will be able to pay toward the cost of college. If it’s likely that your family will have to pay something toward the cost of college but there isn’t savings in place to do so, it’s good to get a sense of what loan options will be available. This can be either college student loans or other loans such as your home equity.
You can also use tools like Net Price Calculators to at least estimate what your cost is going to be. While not exact, most schools provide this opportunity for families to estimate their costs by filling in similar information that will be asked by the financial aid forms.
For families that know they will be relying on financial aid, it’s also good to set expectations with students. If it fits with their admission plans, it’s always great to have a wide-ranging list of schools that the student is genuinely excited to get into so families can be comparing multiple financial aid offers and improving their chances of negotiating for higher awards.
Special Condition/Special Consideration
Also, know that if you get to the fall of 2021 and feel that your 2020 tax return doesn’t accurately reflect your current financial situation, you will be able to push for consideration for additional aid from the schools. This is generally known as either a special condition or special consideration form. Once you complete the financial aid forms using 2020 tax information, follow up with the schools directly and individually to see what their process is for reconsideration.