Apply for Financial Aid. Become a Millionaire on Paper

One minute your annual income’s $50,419.20. The next? $5,041,920.

Something like that happened to at least 165,000 filers of the online Free Application for Federal Student Aid (FAFSA). As nice as being an instant millionaire sounds in theory, the repercussions for financial aid applicants could be painful.

If the error isn’t caught and corrected, “it can make the difference between a student qualifying for need-based grants and not qualifying,” says Mark Kantrowitz, publisher of Edvisors Network Inc., a Las Vegas-based operator of college financial-aid websites.

The culprit: A simple filter that removes decimal points and commas from dollar amounts. When $50,419.20 all goes in the main field for income – rather than the .20 going into the .00 box – the decimal point vanishes, and filers become inconveniently wealthy.

Student Debt: The Rising U.S. Burden

It’s not a new problem, Kantrowitz says. That’s why he always advises filers to use whole dollar figures, ignore any cents and banish commas or decimal points when reporting numbers. The decimal point issue was exacerbated by a tweak to the form, he adds, when the numeric field for adjusted gross income (AGI) was expanded from six digits to seven.

Previously, if someone tried to include cents with a five- or six-digit AGI they’d get a warning that they were trying to enter too many digits. With room for seven digits, someone with a five-digit AGI runs into a problem if they include cents in the main field.

Applications with identified errors will start being reprocessed in mid-July, and aid determinations should be reissued by about July 21. If a student is eligible they’ll still get federal money. The real wrangling could take place in college financial aid offices, if schools have already awarded all the aid money allotted for the year. The Education Department’s Office of Federal Student Aid has said that about 5,500 schools are affected.

Before it's here, it's on the Bloomberg Terminal.