Everyone knows the significance of January. It marks a time when many of us wipe the slate clean and make all sorts of promises, both to ourselves and to others. It's the day we quit our bad habits, decide to get our finances in order, and vow to ask our boss for that pay raise we deserve.
More from TODAY.com
Therapy dog helps 6-year-old boy move arm again after brain surgeries
At just the right moment, a dog named Tank gave a boy named Jack the motivation he needed to get moving again.
- In your face! Julia Roberts has a ball with Jimmy Fallon on 'Tonight'
- Pirelli Calendar to feature first-ever plus-size model
- Swarmed! 8 tips on best mosquito bite treatments and repellents
- Best ATMs ever? See how this bank surprised customers in tearjerker ad
- Therapy dog helps 6-year-old boy move arm again after brain surgeries
But if your child is planning to enter college in the fall of 2007, or if you are entering college yourself, another alarm should now be ringing in your mind: It's time to submit your application for financial aid, a form called the FAFSA and found online at: www.fafsa.ed.gov.
While January 1 isn't the last day to submit by any means (individual school deadlines vary, but the Web application can be completed until July 2, 2007), the earlier you complete the FAFSA, the more likely you are to get a jump on the pot of money that's available, explains Martha Holler, spokeswoman for Sallie Mae, the nation's largest student lender. And with funds at a record high — $152 billion and counting — you definitely don't want to miss out.
Admittedly, starting the process can be a little daunting. The form itself can be confusing, and there's a good bit of fine print. Plus, all the financial questions can make it seem like you're doing your taxes. But college isn't getting any cheaper, and failing to even try for aid could cost you to the tune of several thousand dollars a year. Really. According to the American Council on Education, for the year 2003-2004, an estimated 1.5 million people who did not file a FAFSA likely would've been eligible for a Pell Grant, which can provide students up to $4,050 a year that doesn't have to be repaid.
So sit down at your computer and get started. It'll be about an hour before your application is on its way to being reviewed by the federal government, your state, and the colleges you specify. With any luck, it won't be long after that before your kid receives a nice, hefty aid package in the mail.
Here's how to get started:
Understand how your finances are assessed. For the purpose of financial aid, you are trying to lower your expected family contribution. That means that this is not the time to boast about your fat retirement account or fancy new house — in fact, legally, both of these assets can, and should, be left off the form.
If you've been saving for college, be clear on how that money will be treated. Money in the student's name is assessed more heavily than that in the parent's. Students are expected to contribute 20 percent of their assets, while parents only weigh in at 5.5 percent. (Note to parents still saving for college: That means if you have an account dedicated to money for college, like a 529, keep it in your name to maximize your child's financial aid.)
Do your prep work. Taking the time to get yourself a little organized will save you a lot of hassle. Pull together all year-end statements detailing your investments, as well as your most recent tax returns. Even the most ambitious among us doesn't have his 2006 return completed in January, so it's okay to fall back on last year's numbers.
Look over the application carefully. "Before you fill out the form, understand why they ask each question, and how different combinations of answers to seemingly unimportant questions might have major consequences," says Kal Chany, founder and president of Campus Consultants and author of "Paying for College Without Going Broke," now in its 7th edition. For example, you'll be asked if you're eligible to file a 1040A in place of the longer 1040 form during tax time. If you can answer in the affirmative, Chany says, it could give you an edge.
Read the fine print, and don't skip ahead. Granted, this is starting to sound like the SATs, but people actually miss out on aid because they don't follow the directions. Whatever you do, don't skip questions, no matter how irrelevant or unnecessary they may seem. One thing people tend to exclude, says Holler, is how many members of the family are enrolled in college. "Make sure you are counting everyone — parents and children — and get that number right. That number, more than any other item on the form, is going to effect how much money you get to pay for college."
Don't limit yourself. Much like SATs, the FAFSA allows you to list up to six colleges that will receive your information. But these days, students are often applying to twice that, so don't stress out that your schools will be left out.
After you submit your application with the first six schools, it will be processed and you'll receive a student aid report. You can then revisit your FAFSA online and add up to six additional schools.
Contact your child's choice colleges. If you're just looking for a Stafford Loan, which is a low-interest student loan, then the only form you need to submit is the FAFSA. But why wouldn't you want to gun for the grants and scholarships out there, which unlike loans, don't have to be paid back? To get in the running for all of these, you need to contact the colleges your child is interested in attending and fill out the forms specific to each school. They'll require much of the same information as the FAFSA, so the process, though tedious, doesn't require extra research or preparation.
Finally, take note of the fact that this isn't a one-time deal. You'll have to repeat the process each year your child is enrolled. The good news? It gets easier with practice.
Jean Chatzky is an editor-at-large at Money magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's "Today Show" and is also a columnist for Life magazine. She is the author of four books, including "Pay It Down! From Debt to Wealth on $10 a Day" (Portfolio, 2004). To find out more, visit her Web site, www.jeanchatzky.com.
© 2013 MSNBC Interactive. Reprints