The study — “Into College, Out of Poverty? Policies to Increase the Post-secondary Attainment of the Poor” — is actually a review of 17 previous studies, all which examined the efficacy of various programs aimed at increasing access to college and keeping students enrolled.

The authors of “Into College, Out of Poverty” found that confusing and cumbersome paperwork is a major deterrent to programs, such as the Pell Grant, in reaching their goal of enrolling (and retaining) low-income students who would not otherwise have gone to college.

If targeted students are deterred by administrative hurdles, these programs will not work as well as intended.

You can read more about the study from InsideHigherEd.com.

The document asks students questions about their family’s income, savings and other resources in order to determine how much assistance one is eligible for.

The President Education Secretary, Arne Duncan, has recently announced that the Administration plans to completely eliminate the FAFSA and rely instead on an individual’s tax returns to figure financial aid. Secretary Duncan plans to launch this switch by asking Congress to remove any questions on the FAFSA which relate to information on a student’s or his/her family’s tax return.

Just think: One day you might be able to apply for federal financial aid by simply checking a box on your tax returns! Could it be any easier?! In the meantime, of course, the FAFSA is still a necessary evil. While the 2009-2010 FAFSA deadline is long past, you may want to start gearing up for next year’s FAFSA by taking a look at some of these past posts from our FAFSA Workshop Series:

• Frequently Asked FAFSA Questions

• Common FAFSA Blunders

• How to Get a FAFSA PIN

• The FAFSA Essential Document Checklist

• Interest rates on subsidized Stafford loans are dropping — This year, they will go from a 6% to 5.6% (fixed). Under the College Cost Reduction and Access Act of ‘07, the rate will continue to drop until 2011-2012, when it will reach an all-time low of 3.4%. Unfortunately, the lower rate only applies to loans taken out — or consolidated — in that academic year. Remember, with a subsidized loan, the federal government pays your interest while you are in school.

• Income-based loan repayment — I won’t bother rehashing the details, since I’ve covered them extensively in earlier posts. Bottom line is this: If you qualify, you will save a bundle every month.

• The Pell Grant is increasing — The maximum annual amount will increase next fall from $4,731 to $5,350. If your family earns less than $50,000 per year, you likely qualify for the Pell Grant, so be sure to complete your FAFSA (Free Application for Federal Student Aid).

What do you do if federal student aid is still not enough to help you cover your education costs? It’s time to expand your search for scholarships. Don’t forget to check out our weekly Scholarship Announcement post every Friday. And now you can get even more information on specialized scholarships through our brand new Student Scholarship Search page. Check it out today!

It was good to see that staying in school is still a priority for the two families featured in the piece, but rather heart-wrenching to read the real life stats.

For example, did you know that, across the board, the value of savings in 529 Plans has dropped 21% over the past year? And the market drop isn’t just hitting parents who were saving for their kids’ future. It is also hitting universities and their endowment plans, which are a major source of funding for university-based aid like scholarships and tuition reductions.

The article cites that Harvard University alone lost $8 billion in the past year. (Bear in mind that Harvard has the largest endowment of any university in the United States — often cited as worth more than the GDP of many developing nations!).

So how are families coping with job loss/possible job loss, slashed college savings plans, and rising tuition rates? Here are some of the ways:

• Downgrading — Students that were considering elite private schools, with $50,000+ yearly costs, are now applying to in-state four-year colleges. Would-be four-year college students are instead applying to local junior colleges.

• Taking out unplanned student or parent loans — Some families with slashed 529 Plans (or other college savings vehicles) are taking out PLUS loans or Stafford loans for the earlier years of college, in the hopes that their 529 account will rebound in time to pay them off.

• Delaying contributions to 401Ks and other retirement plans — Some parents are choosing to put off saving for their own retirement in order to help cash flow their kids’ college education today. This seems like a risky proposition to me. I can certainly see the immediate benefit and appeal (your kid gets to finish school), but the loss of compounded interest means that your nest egg could be taking a serious hit. Of course, given the current state of the market, maybe families feel like the potential (likely?) negative interest rates isn’t worth stopping their child’s education.

• Bulking up on cheaper college credits — If your college lets you transfer in credits, you can take courses at your local community college during the summer for a fraction of the cost. You might also want to consider giving yourself a head start by taking as many AP classes as possible. (Did you know that many universities will give you credit for AP classes?)

• Asking the financial aid office to reconsider your aid award –  If you or your parent has recently lost a job, incurred unexpected medical expenses, or experience another financial hardship, you are in a good position to ask your school for more assistance. They might not always be able to help you, but it never hurts to ask.

• Applying for as many private scholarships as you can find — Spending just 5-10 hours a week applying for scholarships can net big results. Even if you only win $500 scholarships, a handful of those can add up to more than half your annual tuition bill. (Check out our weekly Scholarship Announcements posts for an up-to-date list of pending scholarship deadlines.)

• Availing yourself of tax credits — Congress signed new tax legislation in February, which included the American Opportunity tax credit. The new credit increased the tax credit for educational expenses to $2,500, and made it available to families for four years, rather than just two. (See Tax Credits and Deductions for Students for more information about this and other credits.)

Have you found a creative way to finance your or your child’s college education? Tell us about it in the comments section (legal ideas only please ;-)).

Lots of financial experts out there have an opinion on this matter, and most of them say: Don’t do it! For example, here’s:

• MSN Money on why you should never cosign a loan
• Finance author Francine Huff on thinking long and hard before cosigning on a personal loan
• Talk show host Dave Ramsey on how cosigning can hurt your family
• Financial expert Suze Orman on why love means never having to say you’ll cosign

Why do the experts say not to cosign?
Whether it’s for a car loan or a student loan, cosigners are required by lenders when they think the person asking for the loan has a high likelihood of defaulting on the loan.

In other words, if your kids need you to cosign a loan, that’s because there is a pretty good chance that their loan will become YOUR loan.

If and when the primary lender misses a payment, the lender will come to the secondary lender (aka the cosigner) for money. In the meantime, your credit history will be blemished, along with your child. If neither you, nor your child, can afford to make the payment, then the loan will go into default — which is a major ding on your credit record.

Now all this doesn’t mean that your child is a bad or irresponsible person. It just means that statistically, young adults without a guaranteed source of income (which is most college students) are a pretty lousy credit risk.

But I can’t afford college unless my parents cosign a loan
This is the emotional lynchpin that convinces many parents to cosign a student loan. The thing is that only private student loans can require you to have cosigners. Federal student loans do not require cosigners. Not only that, they generally have better terms, such as lower interest rates, more flexible repayment options, etc. Bottom line: If you absolutely cannot afford college without loans, fill out the FAFSA and try to get yourself some federally guaranteed student loans, like a Stafford loan or Perkins loan.

So, what do you think? Is cosigning the next-best way for parents to help their kids who want to go to college, despite the potential risk? Or, if you think cosigning is never a good idea, what do you think a cash-strapped college student should do instead?

So far we have covered three out of the four: 529 College Savings Plans, 529 Prepaid Tuition Plans, and the Coverdell Educational Savings Account. Be sure to review those posts, if you didn’t get a chance to read them yet.

Today we are rounding out the series with the least well known of your tax-preferred college savings options, the Uniform Gift to Minor/Uniform Transfer to Minor Act.  In short, UGMA and UTMA are custodial accounts that allow you to save a substantial amount of money in your child’s name for the purpose of college… or anything else… while benefiting from your child’s lower tax bracket.

(By the way, I keep emphasizing “tax preferred” because, of course, you are welcome to save for college in a regular old savings account, or a CD or a mutual fund. The thing is, you won’t get any tax savings. If you use one of the four vehicles we covered here, however, you will. And saving on taxes means more money to save for college!)

UGMA/UTMA

What is it: A simple transfer of assets into your child’s name, which he or she can use for educational expenses upon the age of maturity. The assets can be anything worth money — cash, CDs, mutual funds, or even real estate.

Pros: High contribution limit per beneficiary — $13,000 per year for single filers or $26,000 per year for joint filers; no income restrictions on contributions; anyone can contribute to account; first $900 in annual earnings are tax-free

Cons: Originally contributor has no financial control once the beneficiary reaches the age of majority; ownership cannot be transferred as it is considered an irrevocable gift

Bottom line: Once the only tax-advantaged way to save for college, the UGMA/UTMA has fallen out of favor now that 529 Plans and ESAs offer more financial control, more flexibility and better tax savings.

Want to know more? We recently updated the Financial Aid Finders section on Saving for College to include an in depth review of the UGMA/UTMA accounts, covering frequently asked questions such as “Do my earnings grow interest-free, like in a 529 Plan?” and “How will the money I set aside in a UGMA/UTMA affect my child’s financial aid award?”

So tell us: Are you currently investing in a tax-advantaged college savings vehicle? Which one did you choose and why?

Well, according to this recent story in Politico, some Congressional Democrats aren’t all that thrilled with the idea.

Apparently their issue isn’t so much with who disperses the loans, as it is with Obama’s plan to use the savings ($94 billion over 10 years) to increase funding for the Pell Grant. Senate Budget Committee Chairman Kent Conrad (D-ND) and House Appropriations Chairman David Obey (D-WI) seem concerned about creating a new entitlement program out of the Pell Grant. (I explained Obama’s proposed changes to the Pell Grant here, but the bottom line is this: The President wants to institute an annual cost-of-living increase in the value of this grant for low-income students, rather than submitting it to the annual appropriations process in Congress.)

The Congressional Budget Office, which assesses the financial impact of all proposed legislation, is reporting that Obama’s student loan program could actually save more than initially projected. When he announced the plan, Obama’s office indicated that it would save roughly $47 billion in 10 years. The CBO, however, figures the real savings would be double that — nearly $94 billion in a decade. Given the American people’s distrust of the credit industry these days, that kind of savings — which would come right out of the pockets of private lenders — may be too sweet to pass up.

In other news, the notion of a student loan bailout is gaining national momentum. Business Week reported last week on the growing popularity of Robert Applebaum’s “Cancel Student Loan Debt to Stimulate the Economy” Facebook group. I posted about about Applebaum a few months ago. He’s the guy who says that forgiving student loans is the best stimulus package of all.  His group, along with the StudentLoanJustice.org (a la Alan Michael Collinge, author of The Student Loan Scam), features prominently in the Business Week piece. It’s definitely worth a read.

Essential FAFSA Documents
FAFSA PIN
Common FAFSA Blunders
FAFSA Deadlines

Well, we have arrived at the final installment of our FAFSA workshop. For some of you, this may no longer be relevant, since you had March 1st (or earlier) deadlines by which to complete your FAFSA. If you are still working on your application, however, you might find some good tips in today’s FAQs. A special thank you to everyone who sent me their questions. I hope that our answers today are able to help you, but if you are still confused, leave me a comment below so I can follow up with you.

I am applying to three private schools and two state schools. How many FAFSAs do I need to complete?
Just one. You can list up to 10 schools on your application.

Keep in mind, however, that each of these schools may have a different deadline. Check with the school’s financial aid office to confirm each deadline, then make sure you finish your FAFSA in time to meet the earliest one. Also keep in mind that some private schools require additional documentation beyond the FAFSA, such as the CSS Profile form. The PROFILE is used by many private colleges and universities and typically takes a more complete family profile than the FAFSA. For more information on the CSS Profile, visit the College Board website.

* My dad just got laid off two months ago, but our 2008 tax returns don’t reflect that, obviously. How can I make a note of this on the FAFSA?

First, I’m sorry to hear about your dad’s layoff. I’m sure that is stressful for everyone. As to your question, unfortunately the FAFSA is not designed to accommodate special circumstances, whether or not they occurred in the previous tax year. In your situation, you should complete the FAFSA as required and then contact the school (or schools) directly. The financial aid office may ask you to present your situation in writing, with relevant documentation. At which point, the school may decide to take this additional information into consideration in determining your Estimated Family Contribution — which could mean that your financial aid award will be higher than expected, based only on the FAFSA.

*How long will it take for my school to get the information from my FAFSA once I submit it?

That’s a good question, especially since some schools make decisions about financial aid on a first come-first serve basis. If you fill out the FAFSA online, it will be processed by the Department of Education within 2-3 business days after you submit it. If you fill it out on paper and mail it in, your FAFSA could take up to three weeks to process. Once processed, the school(s) you selected should have the results within a week to ten days. If you complete the FAFSA manually, it could take an addition two to three weeks.

*Where do I find my school’s code?

Every school has a unique code, which you must fill out on your FAFSA, so that the Department of Education knows where to send the results. Use the FAFSA site’s Federal School Code Search to find your school’s code. You can include up to 10 schools on your application and the results will be sent to each school. Be sure you verify that the code is correct before submitting the FAFSA.

*My parents saved up a good amount of money for my college. It’s not quite enough to pay for everything, but I guess you could say we’re in a good position. I doubt I’d even qualify for federal aid. Is there any point in filling out the FAFSA?

Yes, absolutely. You may not qualify for student loans, grants or work-study — but without a completed FAFSA, you definitely won’t. Additionally, a number of private scholarship foundations require a copy of your FAFSA report, even if theirs is not a strictly need-based award. Don’t cut yourself out of the running for scholarship money — no matter how much money your parents have.

Bear in mind, as well, that the impact of your parents’ saving will be determined by the vehicle in which they saved that money. Meaning, if your parents saved your college money in a 529 Plan or an ESA Coverdell, for example, you could still be in good shape. A 529 plan owned by a parent is considered a parental asset and is assessed at a maximum rate of 5.64% when determining your Expected Family Contribution (EFC). This rate is quite low. Assets that are held in your name, however, are assessed at a much high rate (up to 20%). So, long story short, definitely complete and submit the FAFSA because you may still be eligible for federal financial aid.

*My parents are divorced and have joint legal custody, but I live most of the time with my mom and step-dad. Whose information do I need to list on my FAFSA?

Joint legal custody does not matter as far as the FAFSA is concerned. Nor does whose turn it is to claim you on their tax return. For the FAFSA, you need the tax returns of the parent you lived with most during the last 12 months. Since your mom is remarried, you will need to include your stepfather’s info as well. If your mom and stepdad filed a joint return, then that should be easy. But even if they filed separately, you still need to include your stepfather’s information.

If your parents are separated but not yet divorced, then the situation would be a bit less clear. If your parents are legally separated, you should use the W2s of whichever parent you have lived with most over the past 12 months to determine his or her share of the reported income.

That’s it for me — but if you have other questions, please leave them in the comments section. Or for more information, you can check out the FAFSA site’s very extensive FAQ section.

• Essential FAFSA Documents
• FAFSA PIN
• Common FAFSA Mistakes

And remember that next week, I will be answering your FAFSA questions, so send ‘em in to me on email or leave me a comment with your queries.

Today, I am focusing on FAFSA deadlines. You would think that with something like a deadline, this post would be pretty short. But the reality is, when it comes to the FAFSA, deadlines are anything but cut and dry.

Let’s start with the obvious. The federal deadline for FAFSA on the Web applications is midnight Central Daylight time, June 30, 2009.

But June 30th is far from the end of the story and here’s why: Although the FAFSA is the form you fill out to receive *federal* student aid (student loans, grants, work study), it is also your key to state aid and some private scholarships as well.  Which means that you need to know when your state deadline is, as well as when your school requires you to have filed your FAFSA plus any scholarship that you want to apply for that requires the FAFSA.

The first step in figuring out your specific deadline requirement is to call your college’s office of financial aid. Just ask them what their deadline is — and, while you’re at, what the state deadline is.

You can also check out this list of state deadlines (scroll half way down the page) from the FAFSA website. The deadline for some states, like Connecticut, have unfortunately already passed. But most states have March – May deadlines, so you still have some time.

** Please note that if you live in one of the following states, your deadline is Sunday, March 1st.  I think I know what you will be doing this weekend!

Arizona
Idaho
Maryland
Michigan
Montana
New Jersey
Rhode Island
Tennessee
West Virginia

In the first two weeks of our series, we gave you a list of the Essential FAFSA Documents and talked about How to Get a FAFSA PIN. Next week we will review the various state and federal FAFSA deadlines and then in week 5, we will be taking your FAFSA questions (so send ‘em in to me on email or leave me a comment.)

Today, we are taking a look at some of the most common mistakes students make when completing their FAFSA. I know this process can feel overwhelming when you first get started, but it’s important to stay focused. Mistakes on the FAFSA are serious business, since they can delay the processing of your application by three weeks or more.

Here are some of the most common blunders — and what you can do to avoid them.

1. Typos, spelling errors, missed questions, etc.
The most common mistakes are caused by carelessness. The good news is that these errors can easily be avoided by working slowly and methodically. If you find yourself getting groggy, take a caffeine break.  You might also want to work through the FAFSA workshop with pen and paper before filling out the real deal online. You can download a copy of the 2009 FAFSA worksheet here. And remember, you must never leave a question blank. If it doesn’t apply to you, fill in a zero (0).

2. Incorrect information
In addition to reading each question carefully, you want to be sure you understand what is being asked of you. Refer to the If you still can’t figure something out, get help. The Federal Student Aid Information Center can be reached toll-free, Monday through Friday, from 9 a.m. to 8 p.m., at 1-800-4-FED-AID.

3. Tax errors
The most common tax error is to record your taxes withheld or tax owed, rather than your total income tax. If you received a refund, your total income tax was lower than what you paid. If you owed taxes, it was higher than what you paid.

4. Head of household filing status
Most of the time when someone files as head of household, they are doing so in error. Check with an accountant before filing (or if one of your parents is filing) as head of household. If there was an error, you school will require you to file an amended income tax return, which will delay your award notification.

5. Social Security number and birth date
Any names and social security numbers filled out on the FAFSA must exactly match how they appear on your social security card. If you have changed your name legally, you should have an updated social security card. If you use the wrong name or transpose even one number, it could delay the processing of your application by several weeks. The same applies to your birth date (month, date, year).

6. Marital status

• If you or your parents are married but separated, you should answer Yes to the question: “As of today, are you married.”
• As for which parent fills out the FAFSA in the event of a separation or divorce, it is the one that you have been living with the most time over the past 12 months. This may or may not be the parent who has legal custody of you.
• If the parent who is filling out the FAFSA has gotten remarried, then your step-parent must also report his or her income and assets.

7. Assets

• Your and your siblings’ 529 college savings plans must be reported as parental assets if the accounts are owned by your parents.
• Your and/or your parents’ pension plans do not need to be reported as an asset.

8. Veteran Status
You can only be considered a veteran if you have served on active duty and received an honorable discharge. National Guard and ROTC training does not count as veteran status for the FAFSA.

9. Legal Dependents
If you are pregnant at the time of filling out the FAFSA and your child will be born during the award year (July 1, 2009 – June 30, 2010), you can count them as a member of the household.

10. Interest in Work-Study, Student Loans, etc.
Even if you think you will not want to take out a student loan, answer yes to all questions about interest in various forms of aid. You are not obligated to take those offers if they are made.

11. Signature
If you forget to sign your FAFSA (either manually or with your PIN, if completing the form online), it will not be processed.

12. You and Your
The terms of “you” and “your” refers to you, the student, not your parents.

13. Parents/ Guardians
Only use the information of your biological or legally adoptive parents. If you live with your grandparents, aunts, uncles or foster parents, they are not legally considered your guardians for the purposes of the FAFSA.

Do you have questions about how to fill out the FAFSA, avoid common blunders, or anything else FAFSA-related? Leave me a note in the comments section and I’ll be sure to address your question in part 5 of our FAFSA Workshop Series.