August College Newsletter

Hello,

First, here are some fun August facts:

Did you know that August was originally named Sextilis?

• That is why August is named after the Roman Emperor Augustus.

• Originally, August did not have 31 days.

• The Perseid Meteor Shower occurs in August.

• August has two birthstones: peridot and sardonyx.

• August also has two birth flowers: gladiolus and poppy.

What Are Parents Paying For? Part 2

Last month’s newsletter asked the question: why parents should pay for a college education when students work and study 40% less than they did 50 years ago, graduating knowing less each year.

In part two of “What Are Parents Paying For?” this newsletter will address what consumers are learning; that a pint of ice cream costs more for two ounces less. Colleges are no exception.

Start Looking For Scholarships Now

It’s hard to believe, but some scholarships have deadlines beginning in August. Too many students treat the scholarship search almost as an afterthought. Students needing money to pay for their living expenses, such as books, supplies, personal items, etc. can use whatever free time is left of Summer to research and apply for free money.

Each month, we provide you with tips on your best ways to pay for college regardless of your financial situation.

Who Is The Custodial Parent?

Historically, the FAFSA definition of the “custodial parent” was the parent that the student lived with for the majority of the 12-month period ending on the day the FAFSA application is filed. This often created a very favorable financial aid award if the student was living for a majority of the year with the parent who had lower income and assets.

Under recent amendments to the FAFSA, no matter the living situation, students will now report financial information solely for the parent who provides the most financial support.

For the 2024 – 2025 school year, the new FAFSA rules require the parent who provided the most financial support in the “prior-prior” tax year to complete the FAFSA application instead of the custodial parent. Prior-prior refers to the tax year two years before the beginning of the college semester. For the 2024 – 2025 award year, FAFSA would be looking at the 2022 tax year for this determination.

For example, Dick and Jane got divorced five years ago, and their daughter Sally will be a high school senior this Fall. Jane is a homemaker. Sally lives with her mother for the majority of the year, Dick makes $300,000 per year, and pays Jane $25,000 per year in child support and $40,000 per year in alimony. Under the old FAFSA, Jane would be considered the custodial parent, and completed Sally’s FAFSA using her annual income and assets. Since Dick is not the custodial parent, Dick’s income and assets were not included on Sally’s FAFSA.

Under the new FAFSA, as Dick is providing the majority of the financial support via child support and alimony payments, Sally’s FAFSA would now be completed using his income and assets. Since Dick’s income is substantially higher than Jane’s, it would most likely reduce or eliminate eligibility for need-based financial aid.

In another situation Dick’s income is still much higher than Jane’s but she earns $40,000 per year and receives child support of $25,000.

Just because Dick earns more money than Jane doesn’t necessarily mean Dick is actually providing more support than what is required by a divorce decree.

In another scenario, Dick has remarried, and his new wife earns the majority of income. They file a joint return showing $300,000 in adjusted gross income. According to the new rules, Dick would be required to file the FAFSA, and again cost Sally financial aid.

In any number of circumstance, it would be in Sally’s best interest to use her mother’s income and assets on the FAFSA. Later, if a college aid office questions or dispute this, an appeal could be submitted supporting this filing.

There are many changes to the financial aid system that may negatively affect the planning that parents have done to prepare for college costs. Given these changes meeting with your college financial planner is more important than ever.

Have a great summer!

P.S. If you find this newsletter helpful, please share it with others like yourself!