Parent's Finances and the FAFSA | Step 10

Step #10 of the FAFSA Online Guide to the 2010 FAFSA Form tutorial follows. If you have not read through steps 1-9, we suggest you read: FAFSA Form Guide. If you are ready to file your FAFSA application or Renewal FAFSA form online, then please click here.

Get the Guide to the Current FAFSA Form >>

Step #10: Parent Financial Information

Once you have completed basic demographics, you will go through and complete basic questions about your parents' financial information. These questions are identical to the student questions you completed earlier, but are from the perspective of the parent.

The same advice applies to your parents' finances as yours: filing a tax return (or at least fully completing one) will greatly simplify and speed up this part of the FAFSA. We recommend completing a full IRS 1040 tax form prior to doing this part of the FAFSA.

One set of questions that can cause some confusion is the set about federal benefits programs that your family may participate in. This question appears if you choose Don't Know about a parent being a dislocated worker. If anyone in your parents' household received benefits from the programs listed, check the appropriate boxes.

This question impacts some calculations of your Expected Family Contribution; receiving any of these programs' benefits may qualify you for an automatic zero EFC, meaning you won't be expected to pay for college out of pocket.

For income tax paid in 2009, refer to line 55 on the IRS 1040 of the parents. Do not use line 75 ("Amount you owe") .

For exemptions in 2009, refer to line 6D from the IRS 1040 of the parents. Chances are it will be the same number of people in the household.

There's a long laundry list of financial items besides wages that follow. Check the appropriate boxes for any that your parents have had in the past year. Note that some of the checkboxes will spawn additional tips and text boxes if you check them.

Remember that everything in this section deals with the finances of the parents!

• Hope and Lifetime Learning Credits: check this if you claimed these in 2009. For parents of dependent students, chances are the parents have claimed the credits on their tax returns and not the student's tax return.
• Child support paid: This is child support that the parent has paid to someone else to support their children.
• Work-study: If the parent has participated in the work-study program, enter that information here.
• Grant and scholarship aid: This is for taxable scholarship aid reported on the parent's tax forms. Chances are for parents of dependent students, taxable scholarship and grant aid was reported on the student's tax return and should not be reported here.
• Combat pay: If you are a veteran or on active duty, indicate your combat pay here. Be sure you report the taxable portion of combat pay specified in Box 12, Code Q on your W-2. Do NOT use the amount from Box 1!
• Cooperative education program earnings: This is pay earned by the parent as an intern in a co-op program.
• Deferred pension and savings plans: This question deals with retirement savings usually administered by an employer. If your parent participates in a retirement plan of any kind at work, this should be on your W-2 form that they receive from their employer by the end of January of each year.
• IRA deductions: This question deals with retirement savings usually set up by your parents. Your parent should receive tax forms from those plans each year; once they have done their full IRS 1040, copy the number from line 28.
• Child support received: This is child support that the parent has received from someone else to support their children.
• Tax exempt interest income: If your parent has earned interest on things like tax free savings bonds or other tax exempt financial services, grab line 8b from your IRS 1040. For some parents, a portion of college savings (if in the parent's name) may fall into this category; contact your financial planner or tax expert for clarification.
• Unused portions of IRA distributions and untaxed portions of pensions: If your parent has received money from a retirement plan (cashed out), report the appropriate data from your IRS 1040. It is important to note that if your parent has rolled over a retirement plan from one company to another, or one plan to another, the rollovers do not count. Only cash in hand counts.
• Allowances paid to clergy and military: If your parent receive any kind of stipend from the military, clergy, or other organization where you do not really get a salary, report that here.
• Veterans non-education benefits: Detail your parent's veterans benefits here. This specifically excludes education benefits like the GI Bill. If your parent has any questions about veterans benefits, make sure they contact your VA education officer.
• Other untaxed income: Other untaxed income is kind of vague. Some examples shown are worker's compensation or disability, but the more illustrative list is the list of what not to include, such as student aid (including scholarships), earned income credit, tax credits for children, welfare, Social Security, workforce investment, combat pay, flex savings plans, foreign income, and most other tax credits like special fuels. Chances are most people do not have anything to add here - if you think you might, you will want to consult a qualified financial planner.
• Money paid on your behalf: Any money someone else is paying on your behalf goes here. Use common sense for this question - if someone paid rent for you, it should go here, but someone buying you a Big Mac and fries can safely be excluded.

The final set of questions in this section deals with money your parent has on hand. This financial data is as of the day your parent files the FAFSA. Thus, if your parent is paying rent and have their monthly rent in the checking account, that pile of cash will count against your family. If they paid rent the day before and there's nothing left in the checking account but crickets, that will work in your favor. Make sure your parent has as little cash in checking, savings, and other cash-equivalents as possible on the day you file your FAFSA.

Eligibility for grant when filing the FAFSA form.