The best way to handle this situation via the FAFSA is to contact your financial aid office and speak with a counselor there. Unfortunately, there isn’t a mechanism for you to report this accurately and the financial aid office needs to understand that your severance pay is a one-time lump sum which will not be continuing. In most instances, your financial picture of the past year will not be very reflective of your current year situation. Your financial aid officer can assist you with the appropriate paperwork and information that they will need to consider this situation and get you the most appropriate financial aid package based on this more accurate picture. The best rule of thumb with financial aid is to ask your financial aid counselor when ever you are in doubt about a situation. Never walk away “assuming” anything. Good financial aid counselors are going to be able to help you when and where they can. They can’t always change things but in most instances, they will be working to get you the most financial aid possible when they can.
Most colleges will be sympathetic to a family where a wage-earner just got laid off. The trouble is, when getting laid off, a parent receives a year of salary and benefits, a school may start to drool over the “lump sum” being paid out. This is where self-advocacy comes into play. The student and parents must initiate a direct line of communication with the financial aid office to inform them of the special circumstances. The FAFSA does not really allow for an explanation of events such as these, but the CSS Profile does. A family should work with the financial aid office to help them understand what funds are on the table and which are not in building a financial aid award.
Severance is a special circumstance. It is a one-time financial boost, but it is one which will artificially inflate income. The best way to handle this, according to Mark Kantrowitz, the authority on financial aid, is to contact the college’s financial aid office and ask for a special review. In some cases, the college will make what’s known as an adjustment, recognizing that your family’s income will not be that high in the year ahead.
Colleges want to know the income and resources that parents can bring to pay for tuitions. That has nothing to do with tax, can be taxable or nontaxable income and income can be any type of form.
It’s usually included on a W-2 or a 1099.
There are places to offer fuller explanations of one’s income and assets so it is not solely about amounts. Take the opportunity to explain things as fully as possible. They will also see tax records so the fuller picture will be reviewed. Take the time to offer as complete an application as you can.
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The sources for school statistics and data is the U.S. Department of Education's National Center for Education Statistics and the Integrated Postsecondary Education Data System.
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