Smart move: Remind clients NOW to fill out the FAFSA
Have clients with college-age children and looking for a good reason to check in with them? This may be right up your alley: You can be a hero and further your standing as a trusted advisor by reminding them how important it is to not procrastinate and file their Free Application for Federal Student Aid (FAFSA) form ASAP – especially if they live in one of 17 states (list below) that have early FAFSA filing deadlines or dole out financial aid on a first-come, first-served basis.
Putting it off could be a costly mistake indeed. A recent article from Money pointed out how waiting could literally cost clients thousands of dollars in missed scholarships or grants. Filing before March 1, the article notes, provides a much better chance of getting more and bigger scholarships from state agencies, schools, and foundations. Several states, for example, have “first-come, first-served” financial aid programs that can run out of money quickly. And at least eight state agencies have winter deadlines for their scholarship programs.
As the Federal Reserve Bank of New York revealed that student loan debt in the U.S. surpassed $1.2 trillion in late 2015 and the average student had about $30,000 in debt at graduation, it would be in the best interest of most families to take advantage of all the scholarship and grant opportunities available. Not filling out the FAFSA in a timely manner is a terrible reason to miss out.
Particularly if you are in one of the states listed below, there is no reason not to contact appropriate clients right now to strongly encourage them to fill out the FAFSA immediately to prevent this. Tell them what they need to obtain the required FSA ID and get the process started. They will appreciate this example of you looking out for their best interests.
For clients that don’t have their 2015 tax information yet, instruct them to fill out the 2016-17 academic year form using estimates based on their 2014 tax forms. Then, when they finish their taxes, they can go back in to their FAFSA and make corrections, and then have the revised FAFSA sent on to their schools and scholarship organizations.
Kerry Wallingford, CLU, ChFC, CCA, RICP, president at Wallingford Financial & College Planning in Seattle, told Insurance Forums in an interview last year that college planning provides a great opportunity for advisors to assist clients in an area where they are usually in big need of help.
“The major reason it should be on the radar for advisors is because people are sorely ill-prepared for the cost of college today,” Wallingford said. “If they do not have responsible advisors, that are helping them make sure they can afford college – but more importantly they are on track for retirement – then we’re going to find a lot of people who are falling into retirement completely broke.”
When it comes to a student’s financial aid eligibility, advisors can also point out that money in a 529 plan has to be declared on the student’s FAFSA form while money in a cash value life insurance policy does not – having a positive effect on financial aid qualification.
Wallingford said a lot of mistakes are commonly made when filling out a FAFSA, and advisors can add a lot of value to clients by being well versed in the intricacies of this important form.
Even wealthy clients should be encouraged to fill out the FAFSA form, often required to qualify for other kinds of merit scholarships and grants (it is also required by nearly every major college). Money also published an article detailing reasons affluent families should still complete a FAFSA form.
States with early deadlines or first-come, first-served aid
Alaska (first-come, first served)
California (March 2 FAFSA filing deadline)
Connecticut (Feb. 15 FAFSA filing deadline)
Idaho (March 1 FAFSA filing deadline)
Illinois (first-come, first served)
Kentucky (first-come, first served)
Maryland (March 1 FAFSA filing deadline)
Michigan (March 1 FAFSA filing deadline)
North Carolina (first-come, first served)
Oklahoma (March 1 FAFSA filing deadline)
Oregon (first-come, first served)
Rhode Island (March 1 FAFSA filing deadline)
South Carolina (first-come, first served)
Tennessee (Feb. 15 FAFSA filing deadline)
Vermont (first-come, first served)
Washington (first-come, first served)
West Virginia (March 1 FAFSA filing deadline)
You can also check on other state- and school-specific FAFSA deadlines here. It is also important to note that for the first time beginning later this year, students can file a FAFSA as early as October 1, 2016, for the 2017-18 academic year, instead of Jan. 1, using tax information from 2015.
Federal Student Aid, a part of the U.S. Department of Education, is the largest provider of student financial aid in the nation and processes approximately 22 million FAFSA submissions each year. It provides more than $150 billion in federal grants, loans and work-study funds each year to more than 13 million students.
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