Student Loans and a Broken System.

Originally posted on Walletgydeblog.com

What seems like a long time ago is what I call my own college years.

Like most other college students, I had to complete the FASFA forms in order to know what money was available to me for college. Did I qualify for grants, was I going to need student loans, or was I going to get a combination of both?

Here’s my story.

What is FASFA?

As mentioned in this previous blog7 Financial Aid Tips, FASFA is the Free Application for Federal Student Aid (FAFSA®) that determines what kind of federal financial aid may be available to you.

How does FASFA work?

FASFA to me was like filling out my yearly taxes. I needed to provide a multitude of financial and personal information.

  • Social Security Number
  • Federal income tax returns, W-2s, and other records of money earned
  • Bank statements and records of any investments
  • Records of untaxed income
  • An FSA ID to sign electronically

Once you submit your FASFA form, the application is reviewed and you are deemed either an Independent or Dependent student. This can make all the difference for how much and what kind of aid is available to you.

Independent students are not required to submit their parent’s income or other assets/investments that, in theory, could be used to help pay for college while Dependent students are.

How do you know if you’re an independent or dependent student?

If you can relate to any of the Independent qualifications below, you are considered a Dependent.

  1. You are not working on a degree beyond a bachelor’s, such as a master’s or doctorate
  2. You do not have a child or children, or other legal dependents, who receive more than half their financial support from you
  3. You are not married (or separated but not divorced)
  4. You are under 24 years of age
  5. You are not a veteran of the United States Armed Forces
  6. You are not currently serving on active duty in the Armed Forces for other than training purposes
  7. Your parents are alive (doesn’t count if you’re over 24 years of age)
  8. You are not in foster care, or were a ward of the state
  9. You are not an emancipated child as determined by a court judge
  10. You are not homeless or at risk of homelessness as determined by the director of a HUD approved homeless shelter, transitional program, or high school liaison

Being 24 years of age is probably the easiest goal to shoot for when determining independent vs dependent but who wants to wait until their 24 to start school?!?!?!

If you are a dependent student, the income and other investment information of your parents is combined with yours to determine what aid you qualify (or don’t qualify) for.

Real Life FASFA Scenario

In my case, I was considered a dependent student who was required to submit the financial information of my parents.

My case was extra special and is evidence that there are problems with the FASFA system and how aid is determined.

My mother was a stay-at-home mom. My father was the breadwinner. However, just before I entered college, he became ill and was determined to be permanently disabled. He was forced to apply for SSI (social security insurance). Through that long (and also broken) system, they had used all of their savings and other investments to keep the house and us fed, watered, clothed, etc.

Once his SSI was approved, he received the same monthly amount that any other SSI recipient receives. Anyone familiar with the system knows that this isn’t much. Factor in a mortgage, insurances, food, utilities, out of pocket medical expenses, wow…..that’s quite the tight budget.

With all of that, I took it upon myself to get a job. I was old enough, I could work. So I worked 40+ hours a week at minimum wage which, at the time, was $5.15 per hour.

Let’s do some math.

  1. Father’s SSI yearly income – $1,100 per month x 12 = $13,200 (not taxable since it’s SSI)
  2. My yearly income – $5.15 x40 hours x 52 weeks = $10,712 but let’s add another $2,000 for overtime) so I’m earning about $12,712 annual income BEFORE taxes.

Total household yearly household income is $25,912.

For a family of three, that’s barely over the poverty level, folks.

FASFA is a yearly thing you have to do before the school year begins. I always submitted the required paperwork. I’m not greedy so I wasn’t expecting a totally free ride in grants, anything would’ve helped. However, what I got instead was absolutely zero in grant money, a pile of student loan papers to complete and a lengthy explanation of how my household made too much money as my EFC was too high to qualify for anything but loans. ARE YOU KIDDING ME?!?!?!

Now what?

Well, obviously if I wanted to go to college, the government wasn’t going to be much help and I was going to be stuck with a majority of my college being paid for by loans. However, my financial aid officer advised me that given the financial hardships of my household, I could appeal the FASFA decision.

To appeal, I had to gather every out of pocket medical expense and submit it to the school’s financial aid office for review. In the end, I was granted $800. Being an IT student, that was two books. I was only able to appeal one year as my father’s health improved but still unable to go back to work and get his real income.

Luckily, I was smart enough to come up with my own plan which was the following.

  1. Change my choice of schools to a community college
  2. Take less classes per quarter
  3. Continue working full time and grab any overtime that I could
  4. Use my student loan money wisely
  5. Wrote off my out of pocket school expenses as much as allowed by law on my yearly taxes
  6. Applied for the HOPE and Lifetime Learning tax credits as allowed each tax season
  7. Used my income tax refunds to pay down my student loans
  8. Stuck to a pretty ugly budget
  9. Pray nothing bad happened

After I finished with my 2-year degree, I secured a position with a company that offered tuition reimbursement. I was then able to finish my 4-year degree, pay down my loans that I was reimbursed through my employer, consolidated and locked in my interest rate and paid as much as I could, when I could so I didn’t drown in a lifetime of interest so I didn’t end up like meme #1 from this blog.

One thing that I would do differently is ask more questions. At the time, neither myself nor my parents knew what kind of questions to ask about what other options were available in terms of scholarships, help through the college or other grants that I may have been eligible for.

What’s your FASFA story? Do you agree with the program and process? Tell us about it in the comments.