NEW YORK When Bill and Lydia Talmer applied for financial aid for their eldest daughter in 2007, it took three tries before their paperwork was accepted.
"We couldn't figure how what the 'right' numbers were," says Bill, a lawyer from Madison, Wisconsin. "And we ended up with no real money in the end."
With their son about to start college in the fall, he adds, "We just feel we can find a way to be smarter."
Across the country this month, millions of other students and their parents are also navigating the complex world of applying for financial aid. January 1 marked the annual launch of the season as the U.S. Department of Education released the Free Application for Federal Student Aid (FAFSA) forms that applicants must complete to compete for federal, as well as state and institutional aid.
With a college education more expensive than ever (tuition and fees alone averaged $28,500 at private institutions for 2011-2012, College Board data shows), there are few families today that can afford not to tackle the FAFSA.
"Savvy consumers can minimize the financial burden of higher education by maximizing the amount of aid they go after, and there's a lot of money to be had," says Haley Chitty, spokesman for the National Association of Student Financial Aid Administrators. "Applying is well worth the effort - if you put in the time and hard work, it will pay off."
In recent years, many families have looked at their income levels, decided they wouldn't qualify for aid, and avoided applying altogether. Experts say this is a mistake.
Barry Sysler, a Pennsylvania-based college and financial aid consultant, likes to tell the story of a former client whose income was more than $250,000 - he had one daughter already in college and triplets starting in the fall.
"He thought he would definitely be denied, but with four children in college, he had some real demonstrated need," Sysler says.
Sysler convinced the man to fill out the paperwork and the family received a $10,000 award from the elder daughter's school, Northeastern University. "That's a lot of money to just walk away from."
What goes into the expected family contribution, as determined by FAFSA and schools, can be confusing. The expected contribution is heavily weighted toward income, but other assets count, including cash on hand, savings accounts, trusts, CDs, stocks and investment properties. Primary residences, family-owned businesses and most retirement plans are excluded. Additional children in college can lower the expected contribution significantly, even as much as half in some cases.
How assets are held can make the process even more complicated. While the child's assets are assessed at 20 percent by the need-analysis done by FAFSA and others, a parent's assets are assessed at a maximum of 5.64 percent.
"You're always going to be better off taking all income and assets out of a child's name before you apply," Sysler says.
Very few students should skip filling out the FAFSA.
Some schools might require additional forms - such as the College Board's CSS Financial Aid PROFILE - but the FAFSA is the base application both states and institutions use to distribute financial aid, and some schools require it for students to get on-campus jobs later on.
Importantly, families must submit the FAFSA to qualify for federal loans.
"The terms of federal government loans are much more favorable than private loans and come with additional repayment plans and protections," Chitty says.
Families should complete the FAFSA form as soon as possible and always prior to any deadlines for financial aid applications set by schools. This includes signing the form electronically.
Funds are often meted out on a "first come, first served" basis, and most institutions only have limited funds to give.
"There's no advantage to applying earlier than everyone else," says Brian Lindeman, director of financial aid at Macalester College in St. Paul, Minnesota. "But there could be penalties for filing late."
ACCURACY PAYS OFF
Filing the FAFSA on time, however, requires that it be done accurately. The good news is that under the Obama Administration, the FAFSA has been simplified.
Completing the FAFSA online is the quickest route to ensuring data is correct and filed efficiently. The form makes use of what's called "skip logic," which eliminate questions that don't apply to the particular family completing the questionnaire.
Plus, parents applying this year get another leg up, thanks to a new system that imports IRS tax information data directly from the tax agency into the FAFSA. One disadvantage, however, is that using this electronic transfer means parents must file their taxes before they submit the FAFSA.
"Making use of the online process minimizes the chance of having to produce additional verification down the line and can reduce future paperwork," says Dan Mann, director of financial aid at the University of Illinois at Urbana-Champaign.
If parents can't file their taxes ahead of submitting their FAFSA, they should use estimated tax information and fill in the correct numbers later, he adds.
Even the smallest errors can hold up applications, such as leaving fields blank or using nicknames instead of legal names. Social security numbers and birthdates should be double-checked.
Students with divorced parents can find such calculations particularly challenging. In such cases, the FAFSA asks for the details of only one parent - whomever's household the dependent resided in the most over the past 12 months, regardless of whether the other parent claims the child on his or her taxes. Also, the financial information of the responsible parent's new spouse, by law, must be included, even if the step-parent doesn't plan to contribute to the child's education.