<p>A school looks at the earnings for the full calender year before. If you are going to start this fall, only earnings for the 2011 year count. The information will likely be crosschecked against tax information, so it has to mesh. Your summer earnings for this summer will be included for the school year starting Fall 2013. Some student will continue to earn money during the fall semester, so it makes no sense to pick up the summer piece when it will be info for the 2012 tax return and can be verified that way.</p>
<p>Where it gets confusing is that in addition to earnings of the prior year ended, FAFSA and PROFILE also want a list of assets AS OF THE DATE YOU FILL OUT THE FORM, not 12/31 of the year for which you have provided income. SInce you cannot complete the forms for the fall until the January 1st of that year since the forms do not come out until them, the asset figures will be as of a date that year, for instance for this coming school year, you will have had to have filled out FAFSA on a date during this year, 2012, and those assets may well include money you have made during this year. Confusing, isn’t it? It’s not like accounting when the balance sheet shows assets as of the same date as the year end of the income statement. </p>
<p>So whenever you fill out your FAFSA, or your PROFILE, it is a smart idea to pay all your bills so your accounts are as empty as possible on that day. It would be a very bad idea to fill out the forms on pay day, for example, when the mortgage payment is going to be paid in a day or two, but the money for it is sitting in the account that day. You cannot have “payables” in the asset statement and you cannot explain that money is being earmarked with the exception of financial aid money on the part of the student. And you can’t redo the FAFSA for that reason, if you did not think of this. Once you fill it out and submit it, you are stuck with the money/assets sitting in your account on that day. </p>
<p>It’s also a good idea, if you are a student, to pay your parents for your expenses, and have them put the money aside for you since they are assesed far less than you are for assets. You get hit a big fat automatic 20%, no allowance. They get an allowance, and are hit about 5-6% on assets over the allowance. Students get a $6K income exclusion, but a zero asset exclusion.</p>