What advisors need to know about the CSS profile

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Financial aid can play a pivotal role in helping parents and students pay for college. And who can't use some assistance with some colleges now costing over $280,000 to attend? There are millions of dollars in school endowment funds and many other forms of aid available on the federal level for qualified candidates.

So, what is the first step in helping families determine whether they qualify for this aid?

By completing one of the two financial aid forms. Most families are familiar with the first one, the Free Application for Federal Student Aid, or FAFSA. The FAFSA is required by all colleges that offer federal financial aid and most colleges that offer their own aid. This includes financial aid in the form of federal loans and grants, some institutional aid, many private scholarships and work-study programs in which students earn money through school employment.

RELATED: Does a 529 plan affect financial aid?

But what about that other form? The form used in addition to the FAFSA by almost 300 colleges and scholarship programs? This is the "CSS Profile" and completing this form could be the most important part of your financial aid efforts.

Who requires it?

The CSS Profile is required by a number of selective private schools, including the Ivy League schools, and some flagship state schools such as University of North Carolina and University of Michigan. Profile schools use the CSS to assess a student's eligibility for their own institutional aid dollars. It is schools such as these that possess some of the largest endowment funds, with some willing to meet up to 100% of a family's demonstrated financial need.

Why the need for an additional aid form?

Profile schools feel the CSS does a better job of evaluating a family's true financial strength and ability to pay for college. The additional information obtained on the parents and students income and assets also helps them offer awards that are less likely to fluctuate on a year to year basis. This should help families when it comes to planning for the next four years.

What's the process?

When applying to schools, students should check the aid section of each college's admissions materials in order to find out which aid applications are required. If the CSS Profile is required, parents will need to register at the College Board website and complete the application on the Profile site. The CSS Profile, similar to the FAFSA, can be filed as early as Oct. 1 each year. The initial Profile costs $25 and each subsequent one is $16.

RELATED: What the new FAFSA rules mean for you

The CSS Profile will request information in addition to what is required on the FAFSA application. This is not to penalize the applicant but to provide a more well-rounded financial picture on which to base financial aid decisions.

What additional information does the CSS Profile require?

There are several differences with the FAFSA, but let's highlight a few.

• Home equity on a primary residence is ignored in the FAFSA calculation when assessing need for financial aid. CSS schools include home equity in aid calculations although some will limit the amount based on applicant income. For this reason, filers will be asked to provide details on your home purchase date, price and market value.
• Non-qualified annuities, although not counted as assets for FAFSA aid calculations, are included 100% in CSS Profile calculations. So be careful when someone tries to sell you an annuity with claims of increased aid eligibility.
• In the event of a divorce, the FAFSA will only require the financial information of the custodial parent. This is the parent with whom the child resided with most of the last year. On the other hand, most Profile applicants will be required to provide financial information on both, the custodial and non-custodial parent. This factor alone could result in a dramatically different aid package when compared to a FAFSA school.
• Unlike the FAFSA, which excludes 529 plans whose account owner is a grandparent or third-party, the CSS profile asks for all 529 plans where the student is listed as a beneficiary.

It pays to be proactive when planning for college. The school chosen could have a substantial impact on the aid applicants receive, which is why any college plan needs to incorporate college selection when trying to optimize potential financial aid.

Brett Tushingham is a financial advisor and the founder of Tushingham Wealth Strategies in Wilmington, North Carolina.