10 costly FAFSA filing mistakes

Even with the new and improved FAFSA form, there’s no question that compiling and completing all the information required of financial aid applicants can be a challenge. But that’s no reason to delay tackling the task.

This year, the federal government expects to award $168 billion in student aid based on information provided on FAFSA forms filed between now and June 30th. Yet according to a study by Sallie Mae and Gallup, 24 percent of last year’s families never got around to completing the form. Don’t be in this group. Start now and avoid missing deadlines.

The best way to complete the FAFSA is early and online. Last year, 98 percent of 13 million applicants completed the form electronically. But making mistakes on your FAFSA can delay your application and possibly result in lost financial aid.

To help you get started, here are 10 costly FAFSA filing mistakes you can easily avoid:

#10 Waiting to complete your taxes. The FAFSA form and website are clear that you may estimate income and tax information from the previous year. Although it’s preferable to have completed tax returns available before starting, sometimes that’s just not possible especially if your employer is one of many who routinely ignore W-2 deadlines. Waiting for your employer’s bookkeeper can cause you to miss priority state and college filing deadlines, and these delays could cause you to lose aid. So go ahead and provide estimated information and update once your taxes are done. (HINT: Use your last pay stub from 2009 to provide an income estimate).

#9 Leaving a blank field. The most frequent mistake made by applicants is leaving a field blank. If the answer is zero or the question does not apply to you, write in a “0.” If you leave a question blank, the processor assumes you forgot to answer, and too many blanks may cause miscalculation or an application rejection.

#8 Entering the wrong tax amount paid. Use the 1040 federal tax return for income reporting and reporting taxes paid. Do NOT use information from your W-2 form for this purpose.

#7 Failing to sign the FAFSA form. This sounds like a “duh” moment, but you would be surprised how many manage to screw this up. If you’re one of the 2 percent filling out the paper FAFSA, be sure to sign it. If you’re filing electronically, be sure to obtain your PIN from http://www.pin.ed.gov. Your PIN is your electronic signature, and both student and parent will need to have one to act as signatures when filing the FAFSA online.

#6 Forgetting to update tax information. If you send the FAFSA before filing your taxes, then you must estimate income and tax information. Once your taxes are complete (by April 15th), you will need to amend your Student Aid Report (SAR) by going to the corrections page on the FAFSA website. Do this as soon as possible, as over- or underestimating taxes can affect the amount of aid you receive, and colleges will not finalize your aid package until you’ve provided 2010 tax information.

#5 Missing filing dates. Financial aid is given out on a first come first serve basis. Those who submit the FAFSA early and correctly are placed in the front of the line for eligible aid. Priority filing dates vary by state and college, so check with your financial aid office to get the most accurate information. The FAFSA website also provides a list of known state filing deadlines.

#4 Listing only your top school on the FAFSA form. List all the schools to which you have applied. Gaming this question can lead to problems later. Yes, you’re showing your hand but sometimes that can work to your advantage particularly if you are applying to a list of schools that typically competes for the same students. You don’t want to miss a priority filing deadline because of a desire to maintain privacy about your college list.

#3 Failing to file because of citizenship status. Some, not all, noncitizens qualify for federal financial aid. Typically, the student or parent must have a “green card” or have conditional permanent resident status (I-551C). Other noncitizens with an Arrival-Departure Record (I-94) from the Department of Homeland Security showing any one of several specific designations (refugee, asylum etc.) may also qualify. Read the eligibility instructions carefully before dismissing the process.

#2 Neglecting to coordinate related financial aid forms. These forms include CSS PROFILE, Institutional, or Verification forms. They ask for much of the same information as the FAFSA, but are filed separately. The key is to be consistent on all the forms. Colleges will compare answers and any discrepancies could result in lost aid.

#1 Not filing the FAFSA because you think you make too much money. Way too many families make this mistake. In fact, nearly half the families who failed to file the FAFSA last year cited this as the reason they didn’t apply for federal aid. Why? Sometimes they don’t realize that retirement and home equity are excluded. Or they think they simply make too much money. A little known fact is that there is money available for students who don’t qualify for federal aid. But the only way to prove you don’t qualify for traditional need-based aid is through the FAFSA form. And finally, stuff happens. Life can take unexpected turns and you’re much better off having a FAFSA form on file in case an unexpected emergency changes your financial situation.

Downloading and completing the FAFSA On the Web Worksheet will help you collect and proofread the information for your application before you submit. In addition, there are many FREE resources available if you need assistance or are having trouble filing out the FAFSA. Check the FAQ section on the FAFSA website or call the Federal Student Aid Information Center at 1-800-4 FED AID (1-800-433-3243). Remember that delays and errors can be costly!