retirement

Fill out the FAFSA form

It's FAFSA season. Parents and college students are quite familiar with this acronym. The Free Application for Federal Student Aid is not as difficult to fill out as it's rumored to be. It takes less than an hour to do the application online if you have all your tax info in front of you.

It should be completed as early in the year as possible because financial aid from federal and college sources is most often awarded on a first-come, first-served basis.

To many folks in the middle class, filling out the FAFSA seems to be an exercise in futility since the free money seems to bypass them entirely and go either to the very poor or to the well-to-do. But even for these disparate segments, free funds are getting scarcer.

For instance, Pell grants, generally awarded to students of families with incomes of less than $40,000, declined in size over the last year. Due to a change in the eligibility formula, the average recipient received $2,354 in the 2005-06 academic year, down $120 from the previous year, according to the College Board.

More significant is that the maximum Pell grant (currently capped at $4,050 for four years running) covers only about a third of the costs at a public four-year college. Only four years ago, it covered 42 percent of tuition, fees and room and board.

The news is not as bad for those at the opposite end of the wealth spectrum. Children of affluent parents often benefit from merit-based aid, which ranges from a few grand to a full ride. There is talk that merit-based funds are drying up, but this has yet to materialize on a grand scale.

Colleges and universities have been under fire for offering such aid because it benefits students who really don't need financial aid rather than students who do. As a result of the criticism, a few public institutions have cut their merit scholarship programs substantially.

But pricey private schools have yet to buckle under any pressure. In fact, the trend among some private colleges has been to jack up tuition prices substantially and then offset them with huge discounts for the most desirable prospective students -- those with high grades who have the most potential for elevating the school's national rankings.

So the middle class, whose children may get only above-average grades, end up paying full freight, even though they can hardly afford it.

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"Squeezed" is the verb that Rep. George Miller, D-Calif., the new chairman of the House Education and Labor Committee, uses to characterize the middle class. Middle-income Americans are getting squeezed by the opposing forces of declining incomes and rising costs for college, health care, housing and energy, he says.

Targeting the cheapest money

Be that as it may, it's nevertheless important to go through the FAFSA routine. The whole point is to discover how much the family is expected to contribute to college costs. Even if you believe that your expected family contribution will be humongous, it's important to fill out the federal form just in case you or your college student will need to take out loans. With tuition costs rising faster than inflation each year, college students are relying more heavily on loans to get an education. They should get the best possible terms available.

 

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