FAFSA Pell Grant, Scholarships, and Student Loan Advice
Category: College Preparation
This check list is in the following categories:
This is great advice about how to get the most college grant money possible when completing the FAFSA. This checklist also includes helpful tax information related to grants, scholarships, and student college loans.
FAFSA stands for Free Application for Federal Student Aid. These tips may help you when applying for federal pell grant money to understand how you can qualify for the maximum amount of grant.
-
You should complete the FASFA online immediately after filing your tax return and just after your child has applied for a particular college.
You will need to use the information from your tax return. You will also need to indicate which college your child plans to attend.
-
If you plan to make a large purchase, do so before submitting the FASFA.
Qualification for federal grant money is based on total household income and current cash on-hand. If you submit the FASFA after large payments have been made and before depositing your paycheck, your cash-on-hand will
be at its lowest point.
-
The value of a Roth IRA investment is not included when completing the FASFA.
When applying for federal pell grant money (FASFA) the federal government does not include in your net worth the value of Roth IRA accounts. It does, however, include the current value of any 529 or Coverdell education
investments.
-
Education paid with student loan money qualifies for the education tax credits.
Student loans are the same as cash when it comes to figuring your education tax credit. If you support yourself and have earned enough income so that you owe federal income tax (but not more than the maximum allowed
for qualification of the education credit) you can borrow money for school then use the tax credit to pay back the amount you borrowed.
If your parents support you, they can claim the education credit even if the money used to pay for your education was student loans.
-
Scholarships and FASFA pell grant received is deducted from cost of education when figuring the education credit.
Education credits are calculated on the amount college expenses paid with student loans, cash, or credit card. Scholarships and FASFA pell grant money is not considered "student funds". It does not matter who
paid the expenses. The person claiming the student on the tax return also claims the education credit.
-
If a scholarship is sent directly to the student, it may not need to reduce the education tax credit.
If the scholarship was not sent directly to the college and required for education, it can be claimed as "Other Income" on the student's tax return, which may free up other education expenses to be used toward
figuring the education credit. If the student is in a low tax bracket, this may have little or no tax consequence.
-
Excessive student loans are tempting but dangerous.
Before accepting a large student loan, consider the amount of time it will take to pay off the loan, how likely you are to obtain gainful employment right out of college with your chosen degree, and whether you want that
loan to haunt you for several years. It is very difficult for young workers to pay off student loans even when the percentage rate is low and the financial company offers loan-deferment options.