Everything You Need to Know About FAFSA

Did you know that over 13 million students applying for FAFSA receive more than $110 billion annually in federal aid from the Department of Education? This includes grants, work-study programs, and low-interest loans.

But how do you know if your child qualifies? This guide will answer that question and walk you through the entire FAFSA process, from eligibility to application and beyond. We’ll also clarify common financial aid questions like “Who should apply?” and “Do I have to pay it back?”.

By the end of this blog, you’ll be prepared with the knowledge to understand the FAFSA with confidence and ensure your child receives the financial support they need to achieve their educational goals.

What is the FAFSA?

The Free Application for Federal Student Aid (FAFSA) is a free form used by colleges, states, and the U.S. Department of Education to determine your eligibility for financial aid, including grants, scholarships, work-study programs, and federal student loans.

College costs have skyrocketed. According to a College Board report, in 2022–2023, the average tuition was $10,950 for in-state public universities and a staggering $379,400 for private institutions. The FAFSA helps bridge this gap by awarding need-based financial aid.

The FAFSA gathers information about your and your family’s financial situation. This helps determine your Expected Family Contribution (EFC), which is essentially an estimate of how much your family can afford to contribute toward your college education.

Once submitted, the FAFSA information is used by various entities:

• Federal government: Determines your eligibility for federal grants, scholarships, and loans.
• States: Awards state-specific financial aid programs.
• Colleges: Uses the FAFSA data along with your academic record to create your financial aid package, which may include grants, scholarships, and work-study opportunities offered by the college itself.

Why Should You Fill Out the FAFSA?

Federal student aid can significantly reduce college costs, covering expenses like tuition, fees, housing, books, supplies, transportation, and other school-related needs.

Don’t assume your income disqualifies you from aid. Many families mistakenly skip the FAFSA because they think their child won’t qualify for need-based grants. This is a big misconception. Completing the FAFSA is important, not only for federal grants but also for state and college-specific aid programs that use FAFSA information to award grants and merit scholarships.

Even if you don’t qualify for need-based grants, there’s still a chance to get federal student loans. These loans offer significant advantages over private loans, such as fixed interest rates and income-driven repayment plans. While subsidized loans are awarded based on financial need, unsubsidized loans are available to all undergraduate students, regardless of income.

The bottom line is to not miss out on potential financial aid. Filling out the FAFSA is the only way to determine your eligibility for federal, state, and institutional aid programs. You have nothing to lose and potentially a lot to gain toward making college more affordable.

When Does the FAFSA Open and Close?

The FAFSA opens its application window each year on October 1st. To maximize your chances of receiving federal financial aid, it’s highly recommended that you submit your FAFSA application as close to this date as possible, or even on this very day.

The application window for each FAFSA cycle typically lasts for about a year and a half. For instance, the FAFSA application for the 2022–2023 academic year opened on October 1st, 2022, and remained available for federal processing until June 30th, 2024.

However, it’s crucial to remember that many colleges and states have their own deadlines for FAFSA applications, which are often much earlier than the federal deadline. Therefore, the sooner you submit your FAFSA, the better. Waiting too long can result in depleted financial aid funds, potentially leaving you without any aid at all.

Note: You need to file a new FAFSA application every year you’re enrolled in school to maintain your eligibility for federal aid.

How to Apply for Financial Aid with the FAFSA?

To apply for federal student aid, you’ll need to complete the FAFSA form. Here’s a breakdown of what you need to do to get started:

1. Create your FSA ID (don’t wait!)

Before you can access the FAFSA application, you’ll need a Federal Student Aid (FSA) ID. This acts as a username and password for certain Department of Education websites, including the FAFSA application on the FAFSA website. It’s also required for electronically signing your federal student aid documents.

Here’s the important part: both you (the student) and your parents (if you’re a dependent student) will each need to create your own separate FSA IDs. Apply early to avoid any delays in processing your FAFSA.

To create your FSA ID, you’ll need your Social Security number, date of birth, and email address.

2. Gather your financial documents

While you’re creating your FSA ID, you can also start gathering the documents you’ll need to complete the FAFSA form. Here’s what you’ll want to have on hand:

1. Tax information: Your most recent tax return and W-2 forms for both you and your parents (if applicable).
2. Income records: Documentation of any untaxed income you or your parents receive, such as child support or interest income.
3. Asset records: Information on the current value (as of the date you sign the FAFSA) of your savings accounts, investment accounts, and any investment properties.

Don’t worry if your current financial situation is different from what your 2021 tax return reflects. You can explain this to individual schools after you’ve been accepted.

3. Consider using the IRS Data Retrieval Tool (optional but helpful)

If you filed a tax return for 2021, you can use the IRS Data Retrieval Tool to automatically import your tax information directly into your FAFSA form. This helps reduce the chance of errors from manual data entry.

4. List your colleges

On the FAFSA form, you’ll need to list the colleges you’re considering attending. Be aware that some states have specific order requirements for listing colleges to be considered for state aid. Check with your state’s financial aid office for details.

5. Completely fill out the FAFSA form

Most applicants can complete it in about an hour. Here’s a breakdown of the main sections:

1. Student demographics: Basic information about yourself.
2. School selection: List all the colleges you’re considering, even if you haven’t applied yet.
3. Dependency status: This section determines whether you’re considered a dependent or independent student, impacting what parent information is required.
4. Parent demographics: If you’re a dependent student, your parent or guardian needs to complete this section.
5. Financial information: This section requires detailed information such as tax returns and W-2s. It’s typically the most time-consuming part.

6. Submit and wait

Once you submit the FAFSA, you can track its status by logging into your account. This is a good time to explore non-federal financial aid opportunities like scholarships.

7. Review your Student Aid Report (SAR)

Within 3-5 days of submitting your FAFSA, you’ll receive a Student Aid Report (SAR). This report summarizes your estimated family contribution (EFC) and includes a Data Release Number that your schools need to access your FAFSA information.

Carefully review your SAR for any errors. Your school will use this report to determine your financial aid eligibility and may request verification of certain details. If you find mistakes, update your FAFSA immediately.

8. Compare financial aid offers

After receiving your SAR, colleges will determine your financial need and eligibility and send you financial aid offer letters. These letters typically arrive in late March or early April.

When comparing offers, prioritize free money like scholarships and grants, followed by work-study awards. If you need to take out loans, federal loans generally offer lower interest rates than private loans. The government also offers forgiveness programs for federal student loans.

How Does the FAFSA Determine Aid Eligibility?

The financial aid office at your college uses the FAFSA to determine their financial aid eligibility. This process involves calculating your financial needs. They do this by subtracting your Expected Family Contribution (EFC) from the college’s Total Cost of Attendance (COA). Here’s a breakdown of these terms:

• Total Cost of Attendance (COA): This is the estimated annual cost of attending a specific college for a full year. It includes tuition and fees, but also factors in room and board, books and supplies, and other college-related expenses.

• Expected Family Contribution (EFC): This number is determined by a federal formula that considers your family’s taxed and untaxed income and assets, family size, and the number of children in your family attending college that year. It’s important to note that the EFC is not the actual amount you will pay but rather a number used by the college to determine your financial aid package.

There are two main categories of financial aid: need-based and non-need-based.

• Need-based financial aid: This type of aid is awarded based on your demonstrated financial need (the difference between the COA and EFC). Examples of federal need-based programs include the Pell Grant, Supplemental Educational Opportunity Grant, Direct Subsidized Loan, Perkins Loan, and Federal Work-Study.

• Non-need-based financial aid: This type of aid is awarded regardless of your financial need. It’s determined by subtracting any other financial aid your child has received (including private scholarships) from the COA. Examples of federal non-need-based programs include the Direct Unsubsidized Loan, PLUS Loan, and TEACH Grant.

From the Desk of Yocket

The FAFSA acts as a gateway to financial aid for millions of students seeking higher education. Without the FAFSA, affording college would be an even steeper climb for many. It offers a chance to access grants and scholarships that can significantly reduce the financial burden. Additionally, the information collected by the FAFSA helps colleges distribute their own financial aid resources.

However, the FAFSA also faces significant challenges. The application process can be complex, leading to confusion and errors, especially for first-time applicants. This complexity can discourage some students from applying altogether, causing them to miss out on potential aid. Additionally, the recent issues with the rollout of the “Better FAFSA” in 2024 faced glitches and delays. This highlights the need for ongoing improvement and user-friendliness.

Frequently Asked Questions

What is the FAFSA?

The FAFSA is a form used to determine your eligibility for federal student financial aid, including grants, scholarships, and loans.

When should I apply for the FAFSA?

The FAFSA typically opens on October 1st each year for the following school year. Apply as soon as possible to maximize your aid opportunities.

Is there a cost to apply for the FAFSA?

No, filing the FAFSA is completely free. There are scams that might try to charge you for filling it out, so be sure to use the official FAFSA website.

What do I need to complete the FAFSA?

You’ll need a Federal Student Aid (FSA) ID to apply online, which acts like a username and password. You’ll also need tax information for yourself and your parents (if you are dependent).

What are some common mistakes to avoid for the FAFSA?

The biggest mistake is not applying at all! Other common mistakes include inaccurate information, missing deadlines, and forgetting to list all the schools you’re applying to.

What tax information do I need for FAFSA?

You will need tax return information from two years ago. For instance, when filling out the 2024–2025 FAFSA, you’ll use tax data from 2022.