Financial data verified?

[oldtimer]

Does anyone know if the financial data one submits on the FAFSA and SAR are verified by either the govt or the schools? Do the schools dig up all of our financial records looking for any discrepancies? I have a spotty credit history and I want to know if my application can be held up in any way.

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[southerndoc]

I've heard they randomly verify things personally, and the computer system matches up things with your IRS tax returns (this is also screened by your school).

Even if you have bad credit, you should be able to get loans.

 

[mpp]

The FAFSA and federal loans have nothing to do with your credit history.

However, if you get caught lying on a federal financial aid form, you will be ineligible for aid and pay a penalty up to $10,000 and can serve time in prison.

 

[chuck deli]

I read on the FAFSA site that supposedly 1 in every 3 FAFSA's will contain a "star", meaning that the school is required to verify the information you have provided.

 

[ncalcate]

But how can a school or the Feds verify something like your checking account balance? I wouldn't be stupid enough to lie about my Adjusted Gross Income, which can easily be obtained from the IRS. But what if you had an investment account with $20,000 in it, and you neglected to mention that in your net worth number? I find it hard to imagine that the school or any other institution would have the time/resources to investigate and ultimately discover this account.

Am I off base to think this is unlikely? Thoughts?

 

[oldtimer]

I found this info on FAFSA verification on Wired Scholar.

http://www.wiredscholar.com/paying/content/pay_aid_fafsa_verification.jsp

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Save all records and other materials used in completing the FAFSA because you may need them later to prove the information your reported is correct.

Each year, the Department of Education (ED) selects a group of FAFSAs for verification, a process used to make sure that the information students report is accurate. Verification prevents ineligible students from receiving aid by reporting false information and ensures that eligible students receive all of the aid for which they are qualified.

Some applications are selected because of inconsistent information; others are chosen at random. Colleges and career schools can also choose applications for verification. Students who applications are selected must give their financial aid office certain documentation to show the information on the FAFSA is correct.

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While it is simple for schools to verify AGI by looking at a tax return, I think it is more difficult if not impossible for them to confirm net worth. Liquid assets such as savings, checking, or money market accounts change all of the time. At the time I submit my FAFSA, I may report a huge savings amount. A little bit later, I decide to buy a nice car, house, etc. As a result, my true savings is then a lot different than what I report on my FAFSA.

 

[mpp]

But is lying about your financial situation worth it when you are going into a profession in which you make many of hundred of thousands of dollars per year.

Would you like it printed in the newspaper that Dr. So-and-So of your-town, USA, lied on his financial aid application in school so that he could qualify for an extra $1000 in subsidized loans. Last year Dr. So-and-So earned $280,000.

 

[southerndoc]

They have the authority to verify your checking and savings account information. As far as trading accounts and such, well if you don't list it, I don't think they'll know about that $30,000 Ameritrade account that you have.

 

[carcrazyguy]

My thought is this. If a person had a $30000 stock account, why not just pay for the 1st year of school out of pocket? Then you don't have to pay back that amount when your finished? It would be like paying yourself intrest over the long haul? Or yet, why not just pay that down on a house, so it drops your mortgage payment to a more affordable amount?

 

[mpp]

The house might be a good idea. But keeping it invested and borrowing the money at the low student loan rates might be better in the long run. The interest you earn can be more than the interest on the loan.

 

[carcrazyguy]

That is true, but I try to live by "invest in yourself FIRST". There will be plenty of time for a future doctor to save money, especially if they have a smaller loan to pay back. Just my $.02 worth.

 

[oldtimer]

Originally posted by mpp
The house might be a good idea. But keeping it invested and borrowing the money at the low student loan rates might be better in the long run. The interest you earn can be more than the interest on the loan.

I don't necessarily agree that you will achieve a better return by investing it versus taking fewer loans out. Historically, the return on the stock market is about 8% and the housing market has been hot. However, you should remember that that 8% is over a long period of time. Valuations fluctuate constantly (look at the stock market so far this year) and I believe that it's not a good idea to try to time things when you have a small time horizon. If you plan to start paying back your loans in 4 years, there is a chance you won't make more money than the interest you're charged. The market last year returned 20+%, but it was negative the three prior years. If you were really unlucky, you could have put your money in Enron, Worldcom, or some other hot stock of the moment. Furthermore, any income you generate by investing is reduced by taxes. I personally prefer the peace of mind of knowing that the money in need in the near-term is not being exposed to risk.

 

[mpp]

To each his own when it comes to investing, but time is money. Federal loan rates are currently extremely low (less than 3%). The interest is not compounded until after you complete medical school (a big bonus). While your income is low (for example during residency) some of the interest on these loans is tax deductible.

Taxes will be negligible to non-existant on investment income during medical school since your income will be so low you will likely not be required to pay taxes.

If interest rates rise, you can always take the money out of the investment and pay back the loans. There are many investments that are much safer than any individual securities, most bond funds have historically returned better than that 3% year after year after year (even now). Look for some short- or intermediate-term bond funds at a discount fund family like Vanguard. And putting into a house might be a good idea as well (although with mortgage rates so low, I would even advise borrowing equity out of your home and trying to beat the rate in the market).

3% money with tax deductible interest is practically free money. Don't pass it by. You might be kicking yourself later. Investing in yourself is taking advantage of good opportunities when they come along. This 3% money won't last forever.

 

[wise146]

any chance for FA with an EFC of 20,000. It is really tough because my parents aren't even contributing to school

 

[mpp]

You will be able to get unsubsidized Stafford loans and may get some subsidized Stafford loans.