Financial Aid Application - FAFSA

The cost of going to college has been increasing dramatically in the past several years. During the 2006 – 2007 academic year, the average cost of attending the University of Minnesota as an undergraduate, not including room and board, is expected to be over $8,500. To help defray the expenses of attending college, many students have looked to outside sources of funding.

Three main ways of outside funding are

• grants – awards that do not have to be repaid, usually based on financial need
• loans – borrowed funds which are repaid with interest after completion of education
• work study – a Federally funded program providing jobs for students, usually on campus

The FAFSA (Free Application for Federal Student Aid) must be completed to determine the amount of funding that a family is expected to contribute to the costs of college and the amount that may be granted to the student through grants or scholarships. You may obtain a copy of the FAFSA form and instructions from any college or university financial aid office.

The FAFSA is composed of approximately 100 questions. Two essential portions of the FAFSA are the income section and assets section. In the past, when the application has been scored, the income of the student has been weighed at 50%, while the income of the parents has been weighed at 47%. The assets of the student have been weighed at 35%, while the parents' assets have been given a weight of 5.6%. It is necessary that your previous year’s income tax forms be handy so that you will be able to answer all questions correctly.

Income Information
Untaxed information that should be reported:

• Earned income credit
• Additional child tax credit
• Welfare benefits received
• Untaxed Social Security benefits – This includes only benefits received on behalf of the household size. So, if a grandparent lives with the family and receives his/her own Social Security check, but he/she is not included in household size on your income tax forms, his/her Social Security income would not be included.
• Payment into a tax-deferred pension or savings plan – This includes untaxed portions of 401(k) and 403(b) plans but does not include employer contributions to such plans.
• IRA and other plans - IRA deductions and payments to self-employed SEP, SIMPLE, and Keogh qualified plans.
• Child support received – This does not include foster are or adoption payments.
• Tax-exempt interest income
• Foreign income exclusion
• Untaxed portions of pensions
• Special Fuels credit
• Housing allowances – This is for housing, food, and living expenses that clergy and military personnel receive as part of their jobs.
• Veterans noneducation benefits – This includes Disability, Death Pension, Dependency & Indemnity Compensation (DIC), and/or VA Educational Work-Study allowances.
• Other untaxed income and benefits – This includes untaxed income or benefits such as worker’s compensation, untaxed portions of railroad retirement benefits, Black Lung Benefits, and Refugee Assistance.

Income and benefits that should not be reported:

• IRA or pension distributions that have been rolled-over to another IRA or pension plan within 60 days of receiving the distribution.
• Food stamps and other programs - Benefits received from Federal, state, or local governments from programs such as the Food Stamp Program and the Women, Infants, and Children Program
• Dependent assistance - Generally, up to $5,000 of benefits may be excluded from an employee’s gross income, or $2,500 for a married employee who files a separate return from his or her spouse. This exclusion cannot exceed the employee’s (or his or her spouse’s) earned income.
• Heating/fuel assistance - Payments or allowances received under the Low-Income Home Energy Assistance Act (LIHEA)

Some items will be excluded from income when the calculations are performed; therefore, you should not subtract the following from the income portion. They should be listed on the FAFSA form based on what was received from January 1 until December 31.

• Education credits- The Hope and Lifetime Learning tax credits for attendance at least half time in a degree-granting program. These credits are subtracted directly from the total federal tax on a tax return.
• Child support payments. List any child support payments you paid during the year because of divorce or separation. Do not include support for children in your household. For purposes of the FAFSA, a child is a member of your household if you provide more than half of the child’s support, whether the child lives with you or not.
• Student grants and other awards. You should report any student grant, scholarship, or fellowship aid, including AmeriCorps awards, that was reported to the IRS in your AGI.

Asset Information
An asset is property that has an exchange value. Asset information is needed to determine whether your family’s assets are substantial enough to make a contribution toward the cost of attendance (COA). Only the net asset value is counted in the need analysis; that is, any debts against assets are subtracted from the asset value.

Ownership of an asset may be divided in several situations:

• Part ownership of asset - If you have only part ownership of an asset, you should report only that part. The value of an asset and debts against it should be divided equally by the number of people who share ownership, unless the share of the asset is determined by the amount invested or the terms of the ownership arrangement.
• Contested ownership - An asset should not be reported if its ownership is being contested.
• Lien against asset - If there is a lien or imminent foreclosure against an asset, the asset would still be reported until the party holding the lien or making the foreclosure completes legal action to take possession of the asset.

Assets that are not reported

• Principal place of residence/family farm
• Personal possessions - This includes items such as a car, household items, clothes, or furniture. However, personal debts such as credit card debt cannot be reported.
• The value of life insurance and retirement plans (pension funds, annuities, non-Education IRAs, etc.).

Assets that are reported

• Real estate such as rental property, land, and second or summer homes. Include the value of portions of multifamily dwellings that are not your principal residence.
• Trust funds
• Money market funds
• Mutual funds
• Certificates of deposit
• Stocks and stock options
• Bonds
• Education IRAs in your name
• Installment and land sale contracts (including mortgages held),
• Rental properties – You must report this as investment assets rather than as business assets. If it is reported as a business, a rental property would have to be part of a formally recognized business, such as regular cleaning, linen, or maid service.
• "Take-back" mortgages
• Trust funds and tuition prepayment plans.
• Total current cash, savings, and checking account balance as of the date the FAFSA is signed