By Dave Carpenter, AP Personal Finance Writer
Filling out the form for federal college aid used to be regarded as the equivalent of a root canal.
Thanks to some much-needed steps toward simplification, the Free Application for Federal Student Aid is a bit less grueling for online applicants this year — perhaps just a routine cavity filling.
Worthy of dread or not, the FAFSA remains an essential step toward getting help paying for college. It is commonly used by colleges and states to set grant and loan amounts, and those seeking aid for the fall semester should submit it as early in the year as possible.
In this installment of "Your Money," we answer questions about the application.
Q: What has changed about the FAFSA this year?
A: The U.S. Department of Education is still in the early stages of its effort to make the FAFSA less complex. It has shortened the online application for aid in the 2010-11 school year by up to 22 questions, using improved "skip logic" to allow students or, more likely, their parents to bypass those that don't apply to them.
The most time-consuming questions remain, however.
Experienced FAFSA filers say that perhaps the most noticeable change is the technology that has made the site more user-friendly. It has a shorter worksheet, improved navigation, a handy "help and hints" section, and useful information about your chosen colleges, such as an instant estimate of eligibility for loans.
Q: How long does it take to complete?
A: The FAFSA Web site estimates that first-time users should be able to finish in less than an hour. That may be a best-case scenario. It assumes you have gathered the key information in advance: end-of-year pay stubs if you haven't done your tax returns yet, Social Security numbers of student and parents, driver's license number, investment records, recent bank statements.
Those who have already filled out the CSS/Financial Aid Profile, a separate form used by many private colleges and universities to determine aid eligibility, should find this process goes relatively fast because that application is similar but has more questions.
Mark Kantrowitz, an expert on student financial aid who runs FinAid.org, says most people he talks to say the FAFSA takes them two or three hours to do.
Q: Our income is probably too high to get any financial aid. Why should I apply?
A: Applying for aid is almost essential if you plan to borrow any money for college. Filing the FAFSA is a prerequisite for getting a federal Stafford loan, the most common and one of the lowest-cost ways to pay for school. All students are eligible for a Stafford loan, regardless of income or need.
You want to be protected in case something unexpected happens, notes Lynn O'Shaughnessy, a college expert who writes for Thecollegesolutionblog.com. If you lose your job and suddenly need financial aid from the school or the government, you've already done the required paperwork.
Besides that, Kantrowitz says most people who think they won't qualify for aid are mistaken.
Even if you apply and don't get aid this year, remember that having a second child in college in a year or two could alter the picture dramatically. The amount you are expected to contribute before being eligible for need-based aid is divided by the number of kids in college, so aid could then be available for both.
Q: Some schools have Feb. 1 deadlines for submitting financial aid forms. How can I get the FAFSA done in January when we haven't done our tax returns and our W-2s may not even be available?
A: Submit an application with estimates and amend it later. Use your final pay stubs from last year to estimate income as best you can.
The same goes for dividend income; make estimates based on 2008 data if it will be similar.
Then, once all your W-2s and 1099 forms are in hand, file your income taxes as soon as possible, make corrections to the FAFSA and send the tax returns to the schools.
Don't forget to meet the filing deadline for aid from your state, too. Even if your schools don't all have Feb. 1 deadlines, some state deadlines come soon afterward. The earliest is Feb. 15 for Connecticut (the FAFSA worksheet has a list). Other states award aid only until available funds are used up, and some colleges proceed along similar lines. So even without deadlines, aim to have the FAFSA done by early February at the latest.
Q: What are the consequences of being significantly off on your estimates?
A: Probably none as long as you're within a few thousand dollars, assuming you follow up soon with the correct numbers. Colleges will want to see your final tax returns before disbursing aid anyway.
If there are signs of intentional fraud, your FAFSA could be referred to investigators within the Department of Education. Fines of up to $20,000 and jail time are possible.
Q: Are there any last-minute things I can do to bolster my chances for receiving financial aid?
A: It's too late for most strategies to help with next year's financial aid. But if you have money saved in a student's name that is not in a 529 college savings plan, Kantrowitz suggests liquidating that account and moving the funds to an account in the parent's name.
When assets are in the child's name, the FAFSA formula will spit out a higher number for the amount your family is expected to contribute for college costs before aid kicks in. If you can switch thousands of dollars over to a parent's account, that could make you eligible for significantly more aid.
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