Here’s a treat for a Monday: a chance to share good news about the challenging FAFSA. This month and next, volunteers are standing by to help you fill out a FAFSA, in person, so you can get federal financial aid for college.

Kim Clark, who is always on top of financial aid news at U.S. News & World Report, just alerted her readers about the free FAFSA assistance in her article, Applying for Financial Aid Will Be Easier in 2010. Apparently, some of the volunteers will be tax professionals who will help students with both the FAFSA and their tax returns.

Since the FAFSA is the application you have to fill out in order to get a Pell Grant (and maybe other federal grants for college), getting free help with both the FAFSA and the 1040 sounds like a well-spent afternoon.

Thinking about going back to school, but don’t know where to start? Amanda Ly, a freshman at East Los Angeles College, wrote a gripping and informative LA Youth article about her initial experience with choosing and paying for college:

Hit with the real cost of college

Although her college plans didn’t turn exactly as she had hoped, Amanda’s financial situation will feel familiar to many students and her description of her experience in navigating student loans, and her hard-won advice, will benefit all readers—whether you’re a new high school graduate or a nontraditional student returning to school. For an introduction on college planning, take a look at this student’s thoughts about what she learned during her college selection and application process.

Top tips: What to find out from the school(s) you’re considering and how early to start planning how you’ll pay for college.

Yesterday, one of our companion sites received a helpful email from an administrator in the Financial Aid Office of University of the Sciences in Philadelphia, PA. Ms. Pamela Ramanathan pointed out that when it comes to dependent student vs. independent student status on the FAFSA, “Students must provide parent information on the FAFSA unless they meet the qualification for independent student. Not being claimed on your parents’ tax return does NOT make a student independent. Even if students are not claimed on their parents’ tax returns, they usually still have to provide parent information.”

This is the kind of insight that is valuable for having come straight from an expert working with real people in real situations. Thanks, Ms. Ramanathan! The clarification prompted a curiosity to know more about this FAFSA issue.

What’s the difference between Dependent Student and Independent Student status on the FAFSA?

Essentially, dependent students must report their parents’ income and assets on the FAFSA in addition to their own. Independent students report their own income and assets (and those of their spouse, if they’re married). Generally, they do not have to report their parents’ income or assets.

In fact, it’s easier to define independent student status first, because dependent student status, well, depends on whether or not you fit independent student status.

Reminder: If you’re planning to enroll in a higher education program that starts between now and June 30, 2010, you must file a 2009-2010 FAFSA. If your education program doesn’t start until after July 1st, you’ll submit the 2010-2011 FAFSA.

Definition of “Independent Student”

For federal financial aid eligibility, you are an independent student IF AT LEAST ONE of these criteria applies to you:

• You are 24 years old or older (Born before Jan. 1, 1986 for the 2009-2010 FAFSA; born before Jan. 1, 1987 for the 2010-2011 FAFSA).
• You’re married on the day you apply for financial aid (even if you are separated but not divorced).
• You are or will be enrolled in a master’s or doctoral degree program (beyond a bachelor’s degree) at the beginning of the academic year* your FAFSA is for, 2009-2010 or 2010-2011.
• You’re currently serving on active duty in the U.S. Armed Forces for purposes other than training.
• You’re a veteran of the U.S. Armed Forces. (A “veteran” includes students who attended a U.S. service academy and were released under a condition other than dishonorable.)
• You have children who will receive more than half their support from you during the FAFSA academic year*.
• You have legal dependents (other than your children or spouse) who live with you and who receive more than half their support from you now and through June 30, 2010 for a 2009-2010 FAFSA or June 30, 2011 if you’re filing a 2010-2011 FAFSA.
• When you were age 13 or older, both your parents were deceased and you were you in foster care or a dependent or ward of the court.
• As of the day you apply for aid, you are an emancipated minor as determined by a court in your state of legal residence.
• As of the day you apply for aid, you are in legal guardianship as determined by a court in your state of legal residence.
• At any time on or after the July before you file your FAFSA, your high school or school district homeless liaison determined that you were an unaccompanied youth who was homeless.
• At any time on or after the July before you file your FAFSA, the director of an emergency shelter program funded by the U.S. Department of Housing and Urban Development determined that you were an unaccompanied youth who was homeless.
• At any time on or after the July before you file your FAFSA, the director of a runaway or homeless youth basic center or transitional living program determined that you were an unaccompanied youth who was homeless or were self-supporting and at risk of being homeless.

These are the standard criteria for defining an independent student on the FAFSA. If none of them applies to you, you are considered a dependent student.

You can find additional details and downloadable tip sheets on dependent student vs. independent student status, parents and stepparents, and dependent students in special circumstances at Student Aid on the Web Publications, Forms, and Brochures.

—-

* A number of “independent student” criteria are restricted to specific academic years. For the purpose of federal financial aid and the FAFSA, relevant academic years are defined as:

Have you ever felt like you watched a paycheck come in one door and go out another before you could say “savings account”? Well, the beginning of the new year is an excellent time for advice on saying “hello” to more money and saying “goodbye” to burdensome debt. So, we looked around for just that kind of advice. Here’s what we found:

In the Boston Globe, personal finance guru Suze Orman listed her Top Money Tips for 2010. Check out this advice on saving money, paying cash for purchases, understanding mortgages, preparing for being laid off, and finding career paths for prosperity.

Favorite quote from this article, re: finding a job:

“You should go into a field where you really want to spend the rest of your life. If you can just do what you want to do and you can be the best at what you want to do, better than anybody else out there, you will create a job for yourself. Just because there’s a job market out there this month or next year in an area, it doesn’t mean it will be there a few years from now—look at the car industry.”

And at Bankrate.com, Steve Bucci provided 10 Ways to Dump Your Debt in 2010. Considering that the Class of 2008 carries an average of $23,200 in student loan debt (and often far more than that), any practical and effective advice on how college students and graduates can start eliminating their student loan and credit card debt is a step toward a brighter future.

Welcome to the last year of the first decade of the new millennium!

What do you want to know about financial aid for college? Considering the country’s economic turmoil in 2009, EducationGrant.com certainly picked a good year to launch a college financing blog. Not surprisingly, the posts that attracted the most readers were those that focused on how to get scholarships and grants.

Here are the top 5 EducationGrant blog posts of 2009:

1. Single Mom Scholarships

2. 10 Scholarships for Women

3. Pell Grant Application Process

4. Financial Aid for Single Mothers: Grants

5. Student Loan Forgiveness

With the latest numbers on average student loan debt rising to $23,000, the demand for scholarships and grants and a better financial aid system will surely be intense in 2010. No one has all the answers to the question of paying for college, so EducationGrant.com invites readers to share their personal experience, ideas, and suggestions with each other and the entire EducationGrant community next year.

We’ll be back on Monday, January 4th. Best wishes for a safe and happy New Year holiday.

With the intention of providing consumers with more transparency from lenders, there are big changes to credit card rules and fees on the horizon. But many financial experts have also been emphasizing the equally important need for knowledgeable and responsible borrowing, and this includes responsible borrowing for college. Student loans are a form of credit; just as credit card issuers extend you a “loan” to pay for your purchases, student loan issuers (federal or private) extend you a loan to pay for your college tuition, fees, and expenses. To minimize the risk of relentless student loan debt after graduation, responsible borrowing for college is crucial. The 2009 increase in student loan debt is one reason why financial literacy is a topic you’ll be hearing a lot about in 2010.

Until then, we have time for one more laugh to help us say good riddance to a pretty bad financial year. For a (somewhat painfully) funny look at the credit card industry, take a look at “Card Reform in Action,” a video by political cartoonist Mark Fiore and hosted on the website of the Center for Responsible Lending:

To get a jump start on increasing your financial literacy, read the latest on what to look out for in your credit card agreement fine print: Dodging Reform: As Some Credit Card Abuses Are Outlawed, New Ones Proliferate. New laws may be helpful, but ultimately, responsible borrowing, whether for college, a house, or a wide-screen HDTV, will be up to us, the borrowers.

Worried about adding all that holiday shopping to your debt? Well, you may get some financial power back in 2010, when new credit card and student loan rules start leveling the playing field between customers and lenders.

A week ago, Congress approved a proposal to create a new Consumer Financial Protection Agency. The new CFPA is designed to monitor financial transactions not covered by the Truth in Lending Act — including private student loans, which are currently unregulated. If the CFPA proposal eventually becomes law, the Agency will have the authority to establish and enforce rules for private student loans.

Also, a new credit card law goes fully into effect in two months (February 22, 2010). These new rules ban or restrict unfair fees, require more transparency about credit card costs, and help consumers make more informed decisions about which credit cards they acquire and how they use them.

The Credit Card Accountability, Responsibility, and Disclosure Act:

• Requires “Plain Language in Plain Sight” explanations of both account and contract terms before consumers open an account and the activity on consumers’ accounts after the account is opened. (For example, customers must be told before they open a credit card account what fees they may be charged. Then, after the account is open, credit card statements must conspicuously display fees the consumer paid both in the current month and over the year-to-date, along with the reasons for those fees.)
• Bans unfair interest rate increases
• Bans retroactive interest rate increases for arbitrary reasons and restricts retroactive rate increases due to late payment
• Offers first year protection: Contract terms must be clearly spelled out, and they can’t be changed at all during the whole first year
• Bans late fee traps such as a too-short payment deadline, weekend deadlines, deadlines that change each month, and deadlines that fall in the middle of the day
• Requires over-payments be applied to the balance with the highest interest rate first, and bans interest charges on debt paid on time ( “double-cycle” billing)
• Requires transparency about over-the-limit fees by requiring the customer’s permission before processing any transaction that would push the account over the credit limit
• Restricts unfair sub-prime and low-limit card fees
• Limits fees on Gift Cards and Stored Value Cards and requires more transparency in the disclosure about fees
• Requires consumers under the age of 21 to provide the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt, or proof that the applicant has an independent means of repaying the debt
• Requires a periodic review of all interest rate increases since January 2009 and requires rate reductions when a review indicates that a reduction is warranted
• Requires the inclusion of real information about the financial consequences of decisions, including periodic statements that clearly display how long it will take to pay off the existing balance (and the total interest cost) if the consumer pays only the minimum amount due VS. the payment amount and the total interest cost if the existing balance was paid off in 36 months.

The Credit CARD Act also mandates stricter safeguards for college students and young adults, who are particularly vulnerable to sales gimmicks and traps in the fine print.

• Credit card issuers and universities will be required to be very clear about any agreements they have regarding the marketing or distribution of credit cards to college students and young adults.
• Credit card issuers and regulators will be held accountable for failure to abide by the new rules, including increased penalties for repeat violators.

Financial literacy is going to be a hot topic in 2010. Visit EducationGrant.com often for updates on new student loan regulations, credit card rules, and changes to the federal financial aid process.

One of the benefits for college students provided in the Economic Stimulus Bill (American Recovery and Reinvestment Act of 2009) is a new and improved Hope Tax Credit for higher education expenses. The Hope credit has been renamed the American Opportunity Tax Credit, and if you’re a college student (or student parent) who paid for college in 2009, you may be able to claim this tax credit on your upcoming IRS tax return.

A tax credit reduces your income tax after you’ve calculated it. With the American Opportunity Tax Credit, you get a dollar-for-dollar credit for the first $2,000 you paid for certain college expenses, then 25 cents on the dollar for the next $2,000 spent. The maximum credit is $2,500—a $700 increase over the original Hope credit.

Kim Clark, writing for U.S. News & World Report, talked to a tax expert about the American Opportunity Tax Credit. Read: How to Get Back $2,500 in Tuition Money

Here are 6 facts about the American Opportunity Tax Credit from the IRS:

1. The American Opportunity Tax Credit, which expands and renames the existing Hope Credit, can be claimed for qualified tuition and related expenses that you pay for higher education in 2009 and 2010. Qualified tuition and related expenses include tuition, school fees, books, and other required course materials.
2. The AOTC can be claimed for qualified expenses paid for any of the first four years of postsecondary education.
3. The credit matches 100% of the first $2,000 you spend and 25% of the next $2,000 (per student per year). If you paid $4,000 or more in qualifying college expenses for yourself (or your dependent student), you may be eligible for the full $2,500 credit.
4. The full AOTC is generally available to eligible taxpayers who make less than $80,000 ($160,000 for married couples filing a joint return). The credit is reduced on a sliding scale for taxpayers with incomes above these levels.
5. You can’t claim the American Opportunity Tax Credit in the same year that you claim the Lifetime Learning Credit or the Tuition and Fees Tax Deduction.
6. 40% of the AOTC is refundable, so even if you don’t owe any tax, you can get up to $1,000 of the credit as cash back.

To determine whether a tax credit or tuition-and-fees deduction will lower your tax more, you’ll need to add up your education expenses. Because a tax credit offsets your tax dollar for dollar (rather than just reducing your income), it may give you the bigger benefit. The American Opportunity Tax Credit replaces the Hope tax credit for the next two years. To claim it, you’ll need IRS Form 8863, attached to your 1040 or 1040A.

These days, going to college requires finding the balance between what it will cost you and what you’ll get out of it. As college students take on more financial burden than they can manage, both public and private financial aid experts stress minimizing student loan debt as critical to staying out of a downward financial spiral after graduation.

“Surviving Student Loans and College Debt,” a video from U.S. News & World Report, offers 3 tips for minimizing your student loan debt and provides examples of TV commercials advertising expensive private loans:

The Federal Trade Commission also has tips on avoiding risky loan offers and minimizing student loan debt. Click on the title to download the 4-page “FTC Guide To Avoiding Deceptive Student Loan Offers” PDF.

Each year, the U.S. government provides more than $100 billion in federal financial aid to help students pay for higher education. “I’m Going,” the Federal Student Aid website, shares the stories of a few of these students. In one video, Delia describes how she got help with the financial aid application, then turned around and helped her single mom to go to college, too:

“My mom learned from me! She went back to school and got her GED. Then I helped her fill out the Free Application! In two years, she became a nurse.”

As of 2007, there were 10.4 million single moms living with children under age 18 in the U.S., and it’s probably a safe bet to say that many, if not most, are heroes to their children. Being a mom is not easy; being single mom is even tougher. You’ll find stories all over the Internet about both single and married parents who inspired their children to pursue dreams and goals never accessible to the parents themselves. Delia’s story is a treat.