Phillip Sitar is a financial advisor for Ameriprise Financial Services, Inc., 307 N. Michigan Ave., Suite 1818. He can be reached at 312-849-3002 (cell: 773-791-4508); Phillip.j.sitar@ampf.com; or http://www.ameripriseadvisors.com/phillip.j.sitar.
The federal government's Free Application for Federal Student Aid ( FAFSA) should be filed as soon after January 1 as possible in the year your child will be attending college. The reason is that some federal aid programs operate on a first-come, first-served basis, so filing the application early ensures your child has the best chance of receiving the most favorable aid package.
Here are some common questions and answers regarding the application process.
—What documents will I need to fill out the FAFSA?
The FAFSA relies on financial information from your previous year's federal income tax return; for example, a FAFSA completed in 2012 will rely on information contained in your 2011 return. So the papers and statements you use to file your tax return are generally the same ones you would need to fill out the FAFSA, such as Social Security numbers, W-2 information, and information on savings, investments, and business assets. Your child will also need to have this information.
However, here's a dilemma: since most parents probably won't complete their federal income tax return in January, how can they fill out the FAFSA, which relies on figures from their tax return? There are two possible solutions. The first is to prepare your tax return earlier. The second is to prepare (or hire a tax professional to prepare) an estimated tax return, which can then be used to complete the FAFSA—a practice the federal government deems acceptable. If you use an estimated tax return, keep in mind that you will need to provide a final tax return later on.
Even if you don't expect your child to qualify for federal aid, you should still consider filing the FAFSA because colleges often require it as a prerequisite for students to be eligible for the college's own institutional aid.
How do I file the FAFSA?
You can complete a paper FAFSA or file it electronically. The way you submit the FAFSA does not affect your child's eligibility for aid.
You can get a paper FAFSA at your child's high school or your local library. Once it's complete, you should make a copy for your records and mail it in the preaddressed envelope that comes with the form.
You can file an electronic FAFSA at www.fafsa.ed.gov . You'll need to apply for a PIN before you can actually start filling out the online application. Electronic FAFSAs offer several advantages over paper FAFSAs: detailed online help screens, an online chat option with a customer service representative, built-in error detectors, confirmation that the application was transmitted successfully, and faster processing—one week as opposed to two to four weeks for paper FAFSAs.
If you've previously filled out the FAFSA4caster, the federal government's online financial aid forecasting tool, the online FAFSA will be automatically populated with your data.
—What happens after I file the FAFSA?
After your FAFSA is processed, you will receive a Student Aid Report (SAR) either in the mail or electronically (depending on how you filed the FAFSA). This document summarizes data from your FAFSA and indicates your official expected family contribution (EFC), which is the amount of money the government expects your family to contribute to college costs for the current year to be eligible for financial aid. For example, "EFC25000" means that your expected family contribution is $25,000.
You should review the SAR carefully to make sure it contains your correct income and asset information. Any corrections should be made immediately and sent back for reprocessing. If you have questions, you can contact the Federal Student Aid Information Center at 800-433-3243.
If there is an asterisk (*) next to your EFC figure, you have been selected for verification. FAFSAs are selected for verification randomly, or because the FAFSA is incomplete or contains estimated tax information. If you are selected for verification, you will need to provide additional documentation that might include a final tax return, household information, or appraisals for certain assets listed on the FAFSA. Not all families selected for verification will need to submit the same documents.
The SAR is also sent to each college you listed on your FAFSA. Once the college receives your child's SAR, the financial aid administrator at each school that has accepted your child will craft an aid package that tries to meet your child's financial need (remember, colleges aren't obligated to meet all of it). To determine your child's need, the administrator subtracts your EFC from the cost of attendance at that particular college. Your child will then be notified of the college's aid package in an award letter sent out in the spring. The package typically includes various combinations of federal and college loans, grants, scholarships, and work-study jobs.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2011
Article 4
Ask the experts:
Is a stop limit the
same as a stop order?
BY PHILLIP SITAR
Phillip Sitar is a financial advisor for Ameriprise Financial Services, Inc., 307 N. Michigan Ave., Suite 1818. He can be reached at 312-849-3002 (cell: 773-791-4508); Phillip.j.sitar@ampf.com; or http://www.ameripriseadvisors.com/phillip.j.sitar.
A stop limit is typically used when you're trading during a volatile market and want to target a specific price as closely as possible. When placing a market order, the price you pay is the best price available in the market at the time the order is executed. With a market order you can't be sure of the price you'll get, especially for more thinly traded securities or larger orders that may need to be handled in multiple transactions.
A stop order instructs your broker to buy a stock only when it is selling at or below a specified price (or if you're selling, when it is at or above a certain price). Once the stop is triggered—in other words, once your specified price is reached—your order becomes a market order and is executed at the market price. However, if markets are volatile or the security is illiquid, the market price can change between the time the stop is triggered and when the order is fully executed.
If you're buying a stock and that price is lower, you benefit, but if the execution price is higher, you may pay more than you expected. For example, if you're buying a thinly traded security and your order isn't fully executed before the end of the trading day, you could run the risk of the market opening up strongly the next day—a phenomenon sometimes known as "gapping up"—potentially taking the price of your targeted stock with it. Conversely, if you're selling a stock and the price moves lower before the trade is fully executed, you might make less from the sale than you intended.
A stop-limit order puts a limit on the price you're willing to pay for your purchase (or accept if you're selling). It mandates that a purchase be executed at a specific price or better; that price can be different from the stop level that triggers a trade, and increases the odds of the transaction meeting your expectations. If you're selling, a stop-limit order also can be used to set a minimum price for the sale. Stop limits are typically good for a specific time frame, such as a day, a week, or a month.
Why wouldn't everyone use a stop-limit order with every trade? Because they typically cost more to use than market orders. As a result, a stop limit probably makes the most sense for large orders in volatile markets, when a difference of even a penny or two per share can mount up.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2011
