filing the FAFSA

Families of high school seniors tasked with making a college enrollment decision over the next few weeks are in a tough position. They are about to make a huge purchase—likely one of the largest financial investments of their lives—without knowing exactly how much it will cost them. While the family needs to be prepared to take on four years’ of tuition payments, they only have a financial aid offer for one year in front of them. How do they know they can count on this financial aid for all four years?

The bad news is they can’t, not for sure. At most colleges, financial aid must be re-applied for each year and there is no guarantee that your offer will be the same in subsequent years.

But the good news is colleges don’t tend to be in the bait-and-switch game. Most colleges will try to keep awards consistent from year to year, maybe even increasing aid to coincide with tuition increases, as long as the family’s situation remains the same. But that’s a big caveat—“as long as the family’s situation remains the same…”. There are many things that can change for students and parents over the four years of college, and here are ten of the most common changes that will cause a student to lose financial aid from year to year:

  1. Parents Make More Money. If a parent gets a higher-paying job, a promotion, a significant raise or bonus at work, those increases to income may decrease aid eligibility in a future year. A stay-at-home parent is returning to work to help pay the college bills? Yup, look out for an aid decrease.
  2. Parent Gets Married. The FAFSA assesses the finances of the custodial household, so if you apply for financial aid as a single parent one year, but are married with an additional income in your household the next, expect aid to decrease.
  3. Parents Liquidate Income-Producing Assets. Planning to sell off stock to help pay the college bill? Or withdraw from a retirement account? Capital gains and retirement distributions create phantom income on a future aid application, and can reduce aid eligibility down the line. If you find yourself in this situation, you can appeal to the financial aid office to ignore the phantom income, or, ideally, wait until the last couple years of college to cash out income-producing assets, as those years of income are not looked at on an undergrad aid application.
  4. A Relative Pays the College Bill. Students are asked to report on the FAFSA gifts received or bills paid on their behalf by anyone outside of their custodial household, and this money counts as student income, so if a grandparent or a noncustodial parent pays the tuition bill, financial aid in a future year may be reduced. Again, if you can wait until the last couple of years of college for Grandma’s help with tuition, that delay can avoid this issue.
  5. An Older Sibling Graduates. The financial aid formula acknowledges when parents are paying for more than one child and splits its expected parent contribution between all enrolled college students. That’s a good thing. But it also means that if your initial aid package was based upon having two kids in college, when one child graduates (or drops below half-time attendance), all parental resources are now expected to be able to go to the other child, and their aid may decrease.
  6. Student Doesn’t Make the Grades. All financial aid comes along with a minimum grade point average (GPA) to maintain that aid. GPA requirements tend to be highest for merit scholarship renewal, but even need-based grants (and loans, for that matter!) have minimum academic standards. If you don’t make the grades, you can kiss that aid goodbye, so learn what your GPA requirements are (and make them!)
  7. Student Drops Classes. Similar to the above, student awards (merit and need-based) require you to maintain a certain credit load. Don’t drop a class without knowing what it’s going to do to your financial aid.
  8. Student Drops Activity. If you have financial aid predicated on participating in a certain activity, you generally have to maintain participation in that activity to renew the financial aid. Got a band scholarship, but don’t feel like playing the flute sophomore year? Got an athletic scholarship, but an injury forces you off the field? That funding may disappear, so be sure you understand renewal requirements.
  9. Student Changes Major. Just like the above, if you received funding tied to your field of study (the Economics Department Scholarship, the School of Natural Sciences Award, etc.), that funding could be pulled if you change majors.
  10. Student Wins Outside Scholarship. This one can get tricky, but the bottom line is that financial aid offices are required to incorporate outside scholarships into their financial aid package. If your full need has already been met with the college’s aid, a college may have to reduce existing financial aid to “make room” for the new scholarship. Read “Will Winning a Scholarship Cause Me to Lose Financial Aid?” for more details.

So while colleges are not generally trying to mislead you with generous financial aid offers up front, only to reduce them in future years, families need to understand that there are a number of legitimate reasons why students may lose aid over the course of their four years of college. Be wary of making any moves like the above without consideration of the potential effect on your financial aid. And if you know one of these changes is in your future, have a discussion with the financial aid offices at the colleges in play to get an estimate of how your aid might change in future years before making your enrollment decision. Knowledge is power, and while you might be willing to grab an item with no price tag off the grocery store shelf, the cost of college is too high to take that kind of financial risk. Be sure you understand what your four-year out-of-pocket costs are likely to look like before committing to any college.

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Written by Shannon Vasconcelos
Shannon Vasconcelos is a college finance expert at College Coach. Before joining College Coach, she was a Senior Financial Aid Officer at Tufts University and Boston University.