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Seven Answers To FAFSA Questions For Military Families

1 October 2020

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Disclaimer: This post may contain affiliate links, from which I may earn money. As an Amazon Associate, I earn commissions from qualifying purchases. All opinions are my own, and I only promote products that I use and love!

It’s 1 October, which means that it is the first day that you can fill out the Free Application for Federal Student Aid, also known as the FAFSA. This application is the key to a variety of federal aid, including Pell Grants and student loans, and can also impact your eligibility for the school’s need-based aid. And some schools require it for merit aid, as well, so you definitely want to fill it out. But some of those questions are tricky for military families. I’ve tracked down the specific, written instructions for the hardest questions.

1. What’s Your State of Residence?

I reached out to my friends at the Department of Education to clear up the ever-confusing question of what state to put as your residence on the FAFSA. I got a bunch of info back! Here’s what I was told:

“The Department cannot determine an applicant’s state of legal residence because each state has their own criteria. Therefore, students must report their state of legal residence, as defined by the state.

For assistance with qualifications regarding state of legal residence, Free Application for Federal Student Aid (FAFSA®) applicants should contact the school’s financial aid office.

For purposes of filling out and submitting the FAFSA form, a student and parent(s)—if applicable—must each report their own state of legal residence if it is different.”

And then, they provided a link to the help topic about the parents’ state of legal residence.

As always, I don’t make recommendations when something could be more complicated than it originally seems. However, now you have the official language, and I will point out a couple of things to consider while figuring out the right answer for your specific situation.

  1. In many cases, military members and their spouses are not legal residents in the place where they live on PCS orders, due to the provisions of the Servicemember’s Civil Relief Act. It might help to review the differences between Home of Record and State of Legal Residence.
  2. Being a dependent for tax purposes is completely unrelated to being a dependent for purposes of the FAFSA.
  3. Your child is not protected under the Servicemembers Civil Relief Act, and so they are likely a legal resident of the place where they actually live. Being your dependent, for either taxes or FAFSA, does not make them a resident of the place where you are a resident.
  4. To the best of my knowledge and experience, colleges are not using the states listed on the FAFSA for purposes of in-state or out-of-state tuition.  Schools have their own verifications, and there are special rules for military dependents. The state listings are usually used to find students eligible for specific programs.

2. You Don’t Include Basic Allowance for Housing

Line 44f and 92f of the FAFSA asks you to list,

“Housing, food, and other living allowances paid to members of the military, clergy, and others (including cash payments and cash value of benefits). Do not include the value of on-base military housing or the value of a basic military allowance for housing.“ Next to this question, there is a little question mark. If you click on it, it re-iterates the same thing: “Don’t include rent subsidies for low-income housing, the value of on-base military housing, or the value of a basic military allowance for housing.” So that’s pretty clear!

3. But You Do Include Basic Allowance for Subsistence

BAS needs to be included on Line 92f, Untaxed Income, Housing, food and other living allowances.

According to page AVG-24 of the FAFSA Application and Verification Guide,

“Members of the U.S. military report their basic allowance for subsistence (BAS) but not their basic allowance for housing (BAH).”

Instructions for 2020 FAFSA for military allowances

Straight from the horse’s mouth, this stuff.

4. Don’t Report Combat Pay

Questions 44 and 92 asked about non-taxable income. The instructions for question 44h and 92h specifically say,

“Don’t include extended foster care benefits, student aid, earned income credit, additional child tax credit, welfare payments, untaxed Social Security benefits, Supplemental Security Income, Workforce Innovation and Opportunity Act educational benefits, on-base military housing or a military housing allowance, combat pay, benefits from flexible spending arrangements (e.g., cafeteria plans), foreign income exclusion or credit for federal tax on special fuels.”

However, there is a little trick here. This is in a section about non-taxable income. Not all pay earned in Combat Zone Tax Exempt locations is always completely non-taxable. For commissioned officers generally, combat pay in excess of the highest enlisted person’s pay (plus imminent danger/hostile fire pay) is taxable. It will be coded as taxable income on the W-2, so you should be OK as long as you are using the W-2 taxable income figure.

5. Don’t Report VA Educational Benefits

Educational benefits provided by the Department of Veterans Affairs (VA), including Post 9/11 GI Bill benefits, should not be included anywhere on the FAFSA. From Page AVG-24 of the FAFSA Application and Verification Guide:

However, it is important to note that some Yellow Ribbon benefits may be taxable. There are several examples in this still current 2009 announcement. It’s tricky.

6. But You Do Report VA Disability and Dependency Benefits

VA Disability benefits and Dependency and Indemnity Compensation (DIC) are specifically included in non-taxable income, on line 44g and 92g of the FAFSA.

From page AVG-24 the FAFSA Application and Verification Guide,

This stuff gets counted.

7. Cost of Living Allowances

A helpful reader asked about Cost of Living Allowances (COLA). I’ve reviewed all the available documentation, and there’s no rule saying that you don’t include Cost of Living Allowances. So, I suspect the Department of Education would argue that COLA should be included on Line 92f, Untaxed Income, Housing, food and other living allowances, just like BAS is included there.

Hopefully this will answer some of the biggest military FAFSA questions. If you have more, list them in the comments and I’ll look for answers! I also recommend you check out Three Great Resources for Understanding The FAFSA.

For more information on college funding, check out these articles:

The Big List of Military Scholarships for Service Members, Veterans, Spouses and Kids

What’s Your GI Bill Strategy?

Kate Rants: Parents, Don’t Set Your Kids Up For Failure By Letting Them Get Into Too Much Debt For College

How To Get A GI Bill Certificate of Eligibility

Buying or Selling, BookScouter Will Help You Get The Best Price for Your Books

Do you want to know more about your military pay and benefits?

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9 Comments
Filed Under: Education Tagged With: FAFSA, military

Comments

  1. Heather Walrath says

    16 October 2019 at 4:05 pm

    Awesome! Thank you for doing all the hard work on this!

    Reply
  2. Megan says

    23 October 2019 at 10:01 am

    This is extremely helpful! I’ve been following your blog and it’s been especially helpful for my Senior this year. It’s been wonderful to have a reliable source to help us through this process!

    Reply
  3. Danielle Frederick says

    28 October 2019 at 12:08 pm

    I’m retired military. Do I need to include my military pension on the FAFSA form?

    Reply
    • Kate Horrell says

      2 November 2019 at 2:11 pm

      Yes, military retirement pay is taxable income and is included on the FAFSA.

      Reply
  4. Tim says

    29 November 2019 at 10:12 am

    I recently retired from the Army and am filling out the FAFSA for my senior. Michigan has always been the legal residence for me and my wife; we were both born here. However, we just moved back to Michigan this year, and the FAFSA is asking if we’ve lived here longer than five years. Do I say yes since it’s always been our legal residence, or do I answer no since it’s been fewer than five years since we moved back?

    Thanks.

    Reply
  5. Omar says

    25 February 2020 at 6:40 pm

    Is military per diem considered by FAFSA?

    Reply
  6. T. Barlow says

    8 May 2020 at 11:05 am

    I am retired Navy, own a home in Indiana, lease out that home, but use that address so my children can receive free in-state tuition for college. I have been living in Kansas for 5 years doing civilian EOD for Navy. Am I doing anything not allowed by law?

    Reply
    • Kate Horrell says

      11 May 2020 at 4:36 pm

      That would depend on a variety of factors. The website is pretty clear, but I’m sure a call to the registrar’s office would clear that up even faster. https://registrar.indiana.edu/policies/residency.shtml

      Reply
  7. Heather Tynch says

    23 May 2020 at 12:10 am

    We are Overseas. DO we include our overseas COLA?

    Reply

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Welcome

Hi! I'm Kate! Accredited Financial Counselor®, Navy spouse, and mom of four.

Here at the blog, I talk about the financial issues that affect military families - pay, allowances, and benefits. Plus college stuff, landlording, moving, taxes. We cover a little bit of everything.

My goal is to give you the tools to make the best decisions right now, so you'll be confidently prepared for whatever comes next - whether that's a PCS move, transition to civilian life, or retirement.

So grab a cup of coffee, tea, or whatever makes you happy, and let's get to know each other.

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