05 Mar The FAFSA for parents of older students

Q. Why do my children have to include my income until age 26 on the FAFSA? My oldest son and my youngest child were both out of the house supporting themselves when going to college. I was not supporting them financially, nor did I claim them as dependent on income taxes. This seems unfair. My son ended up with $50,000 in loans because we earned too much for grants.
— Dad

A. Your son is one of millions of students carrying a large student loan debt burden, and that’s a rapidly increasing problem. Before addressing some potential help for him, let’s first answer your question by taking a look at how federal student aid is determined.

A fundamental assumption that underlies federal student aid programs is that the family has primary responsibility for meeting the educational costs of students, said Gene McGovern, a certified financial planner with McGovern Financial Advisors in Westfield.

A second assumption is that dependent students have their parents’ support, he said.

“Therefore, if a student is a dependent, parents’ financial information, such as their income and assets, needs to be considered in awarding student aid.”

That assessment takes place when students apply for federal student aid. To do so, they must fill out the Free Application for Federal Student Aid (FAFSA) form.

The financial information to be reported on the FAFSA depends on the student’s dependency status, McGovern said. Dependent students must report both their own and their parents’ information. Independent students report only their own information or, if married, their own and their spouse’s.

It’s important to understand that dependency status for FAFSA purposes differs from that for tax purposes, he said.

“Whether or not the parents claim the student as a dependent on their income tax returns has no bearing on whether the student is considered a dependent for federal student aid awards,” McGovern said.

Most undergraduate students who are under age 24 as of Dec. 31 of the year for which they are filling out the FAFSA are considered dependent, regardless of whether they live with their parents and regardless of whether they are financially independent, he said.

So, the first dependency status question on the 2019–2020 FAFSA asks whether you were born before Jan. 1, 1996. (If you were, you would be age 24 or older by December 31, 2019 and therefore independent. If not, you are under age 24 and likely a dependent.)

Note that graduate school students are generally considered independent regardless of age, and they usually don’t need to report their parents’ information on the FAFSA.

If a student is under age 24, it’s still possible to be considered independent, provided the student meets certain specific conditions.

McGovern said these include whether the student is an orphan or has been in foster care after age 13; is married; has children or other dependents and provides more than half of their support; is working toward a graduate degree; is an armed forces veteran or serving on active duty; is an emancipated minor; or is an unaccompanied youth who has recently been either homeless or at risk of being homeless.

“Students who fail to meet those criteria may nevertheless be eligible for what’s known as a dependency override, which may be granted by a college financial aid office in unusual circumstances,” he said. “For example, if the student has been abandoned by his or her parents, or has left home because of an abusive situation, he or she may fill out the FAFSA form and then immediately contact the financial aid office at the college they plan to attend.”

Dependency overrides are not available simply because the student is economically independent of the parents, because the parents don’t claim the student as a dependent on their federal income tax return, because the parents refuse to supply their financial information, or because the parents refuse to contribute to the student’s education, McGovern said.

If a student fills out the FAFSA and does not provide the parents’ financial information, the application will be considered rejected, he said. That means that the student might not be able to receive any federal student aid except for unsubsidized loans, rather than grants or subsidized loans. (Subsidized federal loans are considerably more advantageous because the federal government pays the interest on the loan while the student attends college at least half-time and for the first six months after graduation.)

“It’s important to realize that parents’ providing of their financial information on the FAFSA does not require them to pay for their children’s education,” he said. “The information is used simply to provide a standardized way of determining each family’s reasonable ability to contribute to the child’s education – the Expected Family Contribution, or EFC – and the consequent amount of federal student aid awards.”

How that education is actually financed is ultimately up to each student and his or her family.

But let’s also talk about your son’s $50,000 of student loans.

If these are federal loans instead of private ones, your son may be eligible to reduce the monthly payments and/or to become eligible for loan forgiveness by enrolling in one of several available repayment plans, McGovern said.

Some of these plans extend the loan repayment period or provide for gradually increasing payments, he said.

“Others tie the loan payment to the borrower’s income rather than the amount borrowed, with loan forgiveness available for any remaining loan balances after 20 or 25 years of payments,” he said. “Public service loan forgiveness after 10 years is another potential option.”

You can learn more about these repayment plans at the Department of Education’s website.

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