Category: Paying for College

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GI Bill Goals Paying for College

New Law Changes Handling of VA GI Bill Program Debts

Johnny Isakson and David P Roe, M.D. Veterans Health Care and Benefits Improvement Act of 2020

New VA Management of Education Debts

The Johnny Isakson and David P Roe, M.D. Veterans Health Care and Benefits Improvement Act of 2020 passed into law January 5, 2021. While the law is full of changes and expansions to the variety of GI Bill programs, this post will focus on changes VA management of education debts.

Students and schools can receive overpayments of benefits through withdrawing from classes, withdrawing from school, or from failing to pass classes. Prior to the passage of the most recent Veterans Health Care and Benefits Improvement Act, students that received the overpayment were typically assigned financial responsibility for the debt. The Department of Veteran’s Affairs would then collect directly from the students. That has changed, although, the VA is still working to implement changes to comply with the new law.

What you need to know

If you are using VA GI Bill Benefits to pay for college, changes to your enrollment impact your benefits. If you drop classes on or prior to the first day of classes and the VA has already paid the school, the school is responsible for repaying the VA. If you drop classes after the first day of school, the student is financially responsible for repaying the VA. If you drop below full time and have already received benefits, you will be responsible for repaying any over payment amounts.

The Big Change

The VA will no longer collect tuition and fee debts from students. Moving forward, the VA will collect debts from the school and the school will be responsible for collecting from the students. Schools will be the holder of the tuition and fee debt. Students will have to work directly with the school to repay tuition and fee debts.  Students who owe money to the school need to be aware of how tuition and fee collections work in their state.

 Books and Stipend Debts

The Post 9-11 GI bill generously includes a housing allowance and books and supplies stipend. Changes to enrollment, such as dropping below full-time status or withdrawing from enrollment result in debts owed to the VA. Don’t forget that changes made to enrollment, such as moving from full-time to half-time status, are applied retroactively to the start of the semester. There are exceptions to repayment for specific mitigating circumstances. There is also a 6 Credit Hour Exclusion to repayment. If you don’t have a mitigating circumstances exception and you have used your OTE, be prepared to repay benefit overpayments.  It makes sense that as the benefits are paid directly from the VA to the student, the VA will still own the repayment debt. The VA will still collect the repayment debt directly from the student.

The Bottom Line

First, read those emails you get from the VA. They help you stay up to date on changes that directly affect your benefits. Secondly, if you have to withdraw from classes after the first day, be prepared to repay tuition and fees to the school. Third, if you fall below full time or withdraw from enrollment, be prepared to repay housing allowance and stipends directly to the VA.

Categories
GI Bill Paying for College

Getting Your Free Application for Student Aid (FAFSA) Squared Away

getting your student financial aid (FAFSA) squared away

Get Your Student Financial Aid Squared Away

What is the Free Application for Federal Student Aid?

The Free Application for Federal Student Aid, or FAFSA, opens on October 1, 2020. Student borrowers use the FAFSA to apply for federal financial aid to help pay for college. When it comes to paying for college, there are three key factors that determine each student’s cost. Out of pocket costs for college are based on:

  • Your family’s unique financial situation,
  • The student’s academic record, and
  • The school’s financial aid policies.

Completing the FAFSA is the first step in accessing financial aid from both the U.S. Department of Education and the school you plan to attend.

Filling out the FAFSA communicates family financial information to the school’s financial aid office. The U.S. Department of Education uses the FAFSA to determine who receives federal financial aid. Federal financial aid includes work-study programs, grants, subsidized loans, and unsubsidized loans. Colleges and Universities use the FAFSA along with the Expected Family Contribution (EFC) to calculate a student’s financial need. Each school has their own unique combination of need-based aid and merit-based aid. Students should contact the school’s financial aid office for more specific information.

In just a few days on October 1, 2020, the FAFSA for the 2021-2022 school year will be available. Students and parents can complete the FAFSA even if they are not sure which college they will attend. Applying for financial aid early gives college students the best chance to receive financial help paying for college. Most colleges will set a priority filing date, which can be as early as 1 December.

Missing the priority filing date could mean missing out on grants and other limited aid. Students can send FAFSA information to colleges and universities throughout the year. The sooner you submit your financial aid package to the school, the better.

For most students, completing the FAFSA takes about 45-55 minutes. Before you sit down to fill out the application, gather your personal and financial information. First, determine whether the student an independent student or a dependent student.

Who is a dependent student?

Before you start filling out the FAFSA, you will need to understand who qualifies as a dependent student. Your status as a dependent or independent student determines whose information is included in the FAFSA. Dependent students receive family support, so parental information is required. Independent students support themselves. Therefore, only the student household information is included. Dependent status is determined by your tax household. To be considered a dependent student you have to meet all of the following requirements:

  • You are under the age of 24.
  • You are not married.
  • You are not active-duty military.
  • You are not a veteran.
  • You are not a grad student.
  • You are not a parent.
  • You are not an emancipated minor.
  • You haven’t been a dependent/ward of the court, been orphaned, or have been in foster care at all since you turned 13.
  • There are special considerations for homeless students or at-risk students as well.

If you do not meet all the above requirements, you are considered an independent student.

Why does it matter if you are a dependent or independent student for financial aid?

This distinction between dependent and independent students matters a lot. For dependent students, any financial aid awards will consider parental income and assets. For independent students, any financial aid awards only consider their income and assets. Dependent students need to coordinate with parents to access their tax return and other financial information to complete the FAFSA.

Active duty service members under the age of 24 are independent students.

Military spouses under the age of 24 are still considered independent students.

For service members and spouses, parental financial information is not needed to complete the FAFSA. All you need is your household financial information. This means that only the student’s financial information is considered when schools calculate the Expected Family Contribution. And while the military refers to spouses as dependents, spouses are not dependent students. Military spouses are independent students, even if they are under age 24. Even if Mom and Dad still pay the cell phone bill.

For military families with teenagers heading off to college, those teenagers will most likely be considered dependent students. Review the list above if you aren’t sure. Parents will need to gather their financial information and tax returns to prepare for filling out the FAFSA.

As a service member or family member using the Post 9-11 GI Bill, will I need to fill out the FAFSA?

Yes!

Check out this great overview of the Post 9-11 GI Bill, written by MFAA member Andrea Clark. Remember the FAFSA is your doorway to state and school-based aid, as well as federal student aid. Many schools offer additional benefits for students using the Post 9-11 GI Bill. These extra benefits are only available once you have completed the FAFSA and shared the Student Aid Report with the school.

Utilizing your Post 9-11 GI Bill benefits does not disqualify you from other federal student aid, such as grants, work-study, subsidized and unsubsidized student aid. Nor does it disqualify you from other state or school-based scholarships and aid.

Take these steps before you start filling out the FAFSA

Take some time to gather your financial records before sitting down to fill out the FAFSA. It is the responsibility of the student to fill out the FAFSA. And while parents may be tempted to handle this task for their student, student involvement is required. Dependent students and parents must each create their own unique FSA IDs and passwords.

Parents cannot create an FSA ID for their child. The FSA ID and password allows you to log in to StudentAid.Gov and complete the FAFSA. It also allows you to sign the FAFSA electronically.

What information do I need complete the FAFSA?

To complete the FAFSA you will need the following information. You will need your parent’s information if you are a dependent student.

  • Name, date of birth, social security number (This includes for parents as well as dependent students.)
  • Tax returns from 2 years prior (The FAFSA considers your tax return from the prior-prior year. That means if you are filing the FAFSA this October 1, 2020, you will need your 2018 Tax Return.)
  • Students and parents will need all their W-2s for the past 2 tax years. The FAFSA form contains a tool to link your application directly to the IRS. This is your best option. If you cannot link your accounts, you can enter the information using the data from your tax return.
  • Financial account information: checking, savings, retirement accounts, 529 plans, investment accounts.
  • Information about your real estate assets: mortgage information, tax assessed value (not Zillow)

Filing the FAFSA gets complicated for blended households. For more information, check out the U.S. Department of Education’s Parent’s Guide to Completing the FAFSA Form. They even have a handy graphic. Be sure you read the questions on dependency carefully. Keep in mind, dependent status is defined according to the IRS rules.

Tips for filling out the FAFSA

  • When you fill out the FAFSA, ‘you’ and ‘your’ mean the student. If the FAFSA requires parent’s information, it will be specifically stated. Read carefully and pay close attention to whose information is needed.
  • Be prepared to list each school’s Federal School Code when you complete the FAFSA. If you are considering more than 10 schools, list the first 10. Log out. Log back into your application and select ‘Make FAFSA Corrections’. Update your school list with the remaining schools. You can also call the Federal Student Aid information line to add schools to your list. Finally, you can add schools to your paper Student Aid Report and mail it back to Federal Student Aid.
  • In order to receive student aid, you will need to file the FAFSA for each year you are in college.
  • Keep student FSA IDs and parent FSA IDs separate. Don’t log in at the same time and only log in under your own FSA ID.

Choosing your college, paying for school, and understanding your financial aid award gets more complicated each year. Rely on trusted resources. For more information visit Studentaid.gov, the U.S. Department of Education’s blog, or contact one of the MFAA advisors as we would love to be able to help!

The Bottom Line

Paying for college is typically the second-largest purchase most of us will make in our lifetimes. Sometimes, we will even do it twice, paying for our own education as well as our children’s education. It is so important that you maximize your purchasing power and financial strategy.

As financial advisors, members of the MFAA help people just like you navigate the questions, challenges, and planning opportunities related to playing for college. We would love to be of help and have a free consultation.

Find an advisor here!