Private college students: Tackle the CSS Profile

Financial aid season is upon us, and in addition to filling out the Free Application for Federal Student Aid, or FAFSA, the form that qualifies students for federal grants, loans and work-study jobs, some students will also have to file the College Scholarship Service, or CSS, Profile. Used by more than 350 private institutions throughout the U.S., the CSS Profile is much more extensive than the FAFSA and can qualify students for enormous nonfederal financial aid packages funded by their college. Here’s what you need to know.

More questions, fewer sheltered accounts

The CSS Profile is a much lengthier application than the FAFSA. That’s because the application considers income streams and assets the FAFSA does not such as retirement accounts, life insurance plans, home equity on a family’s primary residence, and income and assets held by a noncustodial parent in cases of divorce.
“(The application) basically asks you about every little bitty detail about parents’ finances and assets,” says Dan Maga II, vice president of American College Funding, a college planning firm in Wilmette, Ill. “It can get down into what kind of car you drive, what kind of church you go to, just about everything under the sun they can ask.”
In addition to the basic CSS Profile, many colleges also add their own supplemental questions to get an even fuller view of your financial situation. The reason, explains Michael McLaughlin, director of financial aid operations at Middlebury College in Middlebury, Vt., is because at private institutions that require the CSS Profile, bigger aid is often at stake. Whereas the FAFSA can only qualify students for a maximum need-based grant package of $9,550 per year — and only the lowest-income students will qualify for a package that big — the average yearly grant package at Middlebury tops $32,000.
“We need to be more diligent on the information that we collect and get a more accurate picture for each student when giving out high amounts of institutional aid,” he says.
The Profile assesses the money you have, but it also takes the money you pay out into consideration by asking questions about your family’s medical expenses, debts, whether your family’s home is underwater, business expenses and other miscellaneous costs that aren’t included on the FAFSA.
The Profile may ask for more information, but that doesn’t necessarily mean all assets will subtract from a student’s financial aid package.
“As far as retirement assets go … we like to have that information available, but it’s not factored into (our) actual aid calculation,” says Kim Downs-Burns, associate vice president for student financial services at Middlebury.
Unlike the FAFSA, which determines how much government aid you’re eligible for regardless of where you attend school, colleges and universities individually decide how to interpret CSS Profile information and which assets and expenses to take into consideration.

Maximizing your aid

The Profile is more thorough than the FAFSA, but there are steps families can take to maximize their aid eligibility. Maga says the number one mistake families make is overestimating the value of their primary home.
“The lower they keep their value, within reason, they’re going to help keep their expected family contribution down and potentially garner more aid,” he explains.
Maga adds that as with the federal aid methodology, many schools also give greater weight to assets held in a student’s name than those held in a parent’s name, though it’s difficult to quantify by exactly how much because aid formulas vary from institution to institution. To up your federal aid eligibility as well as potential aid eligibility on the CSS Profile, Maga recommends that families shift assets from accounts held in a student’s name to those held in a parent’s name prior to filling out either form.
With so many questions, mistakes are easy to make, and deadlines are easy to miss, says Al Hoffman, director of the College Funding Service Center college consulting firm in Waterford, Conn. Whereas the FAFSA is free, goes to all schools and doesn’t become available until Jan. 1 of the year students will attend college, the CSS Profile is limited only to select private schools, costs $25 to submit for the first school applied to and $16 per school after that (fee waivers are available to certain students) and becomes available in fall of the year before the student will attend school.
The CSS Profile is frequently due significantly earlier than the FAFSA as well. Many schools require students applying for early decision or early action to file the application by Nov. 15 of the year before they attend. And regular admission students often must file by Feb.1 of the year they will attend. Financial aid deadlines for both the CSS Profile and the FAFSA vary from school to school and in both cases, families are urged to estimate their income tax figures and submit the forms as early as possible to take advantage of aid awards that are distributed on a first-come, first-serve basis.
“You really can’t wait,” says Hoffman.
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Maximize financial aid by filling out FAFSA

As of Jan. 1, the Free Application for Federal Student Aid, or FAFSA, became available for the 2012-13 school year. The FAFSA qualifies students for federal grants, loans and work-study jobs, and serves as the basis for determining aid eligibility for many private awards. In light of other 2012 financial aid changes that will make it tougher for some students to pay for college, maximizing your federal aid eligibility is more crucial than ever. Here’s how to get an A in FAFSA 101.

Understand the basics

The sole purpose of the FAFSA is to determine your expected family contribution, or EFC — the amount the government believes your family can chip in for college that year. Based primarily on your family’s income and assets, the EFC qualifies students for federal grants, loans and work-study programs. It’s also one of the main factors used by colleges to determine how much your family can pay relative to the cost of that school and how much the college will contribute to your total aid package.
“Everyone should fill out the FAFSA,” says Beth V. Walker, founder of College Funding Coaches, a college finance planning firm headquartered in Las Vegas. “There are a lot of parents who think they make too much money and that they’re not going to qualify for anything, but I think it’s a surprise to many people to know that the merit-based aid is handed out many times through the need-based door.”
All undergrads, regardless of their family’s income, can qualify for a total of $27,000 in unsubsidized Stafford loans over four years, reports the Department of Education, while families with adjusted gross incomes of $60,000 or less can also usually expect some federal grant aid, says Walker. Unlike student loans, grants need not be repaid, though certain conditions may apply. Before filing, families can get an estimate of their EFC by using the FAFSA4Caster tool at Fafsa.ed.gov.

The loopholes

Understanding the federal aid methodology is especially important in light of 2012 financial aid changes. This year, the interest rate on subsidized Stafford loans for undergrads will increase, subsidized Stafford loans for grad students will be eliminated and students will have fewer semesters to qualify for a Pell Grant. It will also become harder to qualify for the full Pell Grant award. As of last year, families with adjusted gross incomes of $30,000 or less automatically qualified for a full Pell. This year, that threshold will decrease to $23,000, reports the Department of Education.
“Generally, need-based financial aid is going to be harder to get next year than it was last year,” says Jay Murray, president of Solutions for Tuition, a college planning firm in Lone Tree, Colo.
Families can take action. While most families can’t change their income, they can maximize their federal aid eligibility by filing the FAFSA as close to Jan. 1 as possible and by shifting or spending assets held in the student’s name.
“Student assets are assessed at 20 percent,” says Murray, meaning for every dollar in an account in a student’s name, the government will subtract 20 cents from the student’s aid package. This starts with need-based grants. “Parental assets are assessed at (up to) 5.6 percent.” The exception, Murray says, is 529 plans. These are assessed at the parental rate regardless of whether they’re held in a parent’s or student’s name.
Gary Carpenter, executive director of the National College Advocacy Group, a nonprofit organization in Syracuse, N.Y., says families can also increase their aid eligibility by knowing which investment vehicles the government doesn’t take into consideration.
“The FAFSA form does not assess the family home. It does not assess retirement accounts. It does not assess life insurance policies or annuities,” says Carpenter. “Also, they do not assess personal assets like automobiles, clothing, furniture — none of that is assessed.”
Families looking to shift assets from assessable accounts to sheltered ones can do so by maxing out their retirement accounts, paying down the mortgage on their primary home and purchasing personal items the student will need before filing the FAFSA. These personal items can include a computer or dorm supplies. Families who need those assets to be available for college costs can simply move funds from an account in the student’s name to a 529 plan or one held in the parent’s name.
Sandy Baum, a senior fellow at the George Washington University Graduate School of Education, adds that students should also alert their school’s financial aid office about expenses that aren’t considered on the FAFSA.
“For example, if you fill out (the FAFSA) and your parents made a reasonable income last year and then they lose their jobs, you want to be sure you go to the financial aid office,” she says. “Tell them this because they can adjust your aid award to account for those unfortunate new circumstances. That’s terrifically important.”
By letting your aid office know about factors that aren’t included on the FAFSA, such as medical expenses, death in the family, divorce or parental job loss, and by providing documentation, families can keep aid officers abreast of their current financial situation and increase their chances of landing college aid.
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