By Jason Anderson, CFP
The Free Application for Federal Student Aid (FAFSA) is your gateway to financial aid for college. The FAFSA opens for seniors, returning students, and adult learners October 1 each year. This form garners a lot of interest – and produces much anxiety – for the families filling it out. Luckily, you can approach this form with confidence given the right advice and tools.
Some families, especially those on the extreme edges of the income spectrum, decline to submit a FAFSA form. I would advise against this. For households with lower income and assets, the financial consequences can be serious. According to the National College Attainment Network, $3.75 billion in Pell Grants were forfeited for the high school Class of 2021.
The results of not submitting a FAFSA form are adverse for high income families as well. Although it is true that high income families will not receive grant money (specifically, the coveted Pell Grant) their children can receive student loans. Granted, federal student loans must be paid back with interest, however, they have great terms (at least for a student who likely doesn’t have a credit score), perks (like income-driven repayment plans), and forgiveness opportunities (such as Public Service Loan Forgiveness). Many families have found them to be a valuable funding tool to finance an increasingly expensive college degree. Moreover, many schools use the information in the FAFSA to disburse their own financial aid and scholarships. If you don’t fill out the FAFSA, you could miss out on these funds.
Getting started with the FAFSA form is easy. As the name implies, the FAFSA is free. If you are being asked to pay to submit the form, you’re on the wrong website. Of course, there are many sites offering preparation services for a fee, but this is not necessary (or even advised). You can find the official FAFSA at fafsa.gov or by using the “FAFSA Form” dropdown menu at studentaid.gov.
The first thing you need to start the FAFSA is an FSA ID. The FSA ID is how you access and sign the digital FAFSA form. If you don’t have an FSA ID, you can set one up when prompted to sign into the FAFSA.
The Department of Education provides a list of documents to help you prepare for the questions in the application.
- Your Social Security number
- Your Alien Registration number (if you are not a U.S. citizen)
- Your federal income tax returns, W-2s, and other records of money earned
- Bank statements and records of investments
- Records of untaxed income
If your student is classified as a dependent by the FAFSA form (in terms of the FAFSA, not in terms of taxes), these items will be needed for both the parent and the student.
Use the Tools
The FAFSA has become easier to fill out over time – and will become even easier in the coming years. I encourage applicants to use a few tools to make their lives easier. First, if you’re eligible, use the IRS Data Retrieval tool (DRT). The DRT can import information directly from your tax return, so you don’t have to search through your tax forms or perform hand calculations. Second, if you need additional assistance for any given question, make sure to check out the question mark icons within the digital FAFSA form. In many cases, your question can be answered by reading this detailed guidance. Finally, the Department of Education provides a hotline for additional questions you might have: 1-800-4-FED-AID.
After your FAFSA application is processed (check your email for confirmation) the schools you listed on the form will receive your financial information. Those schools will then check to make sure you have completed their required admissions and financial aid checklist, and then start compiling your financial aid package. A financial aid package (or letter) is a document which outlines the full cost of the college on an annual or semester-by-semester basis, in addition to the financial aid that is offered to you including grants, scholarships, work-study, and loans. For traditionally-aged college students exiting their senior year, this should hit your mailbox around February-May.
In summary, don’t fear the FAFSA. You will survive this process, and likely survive it many times as your student moves through education post-high school. Fill it out as soon as possible when the application opens October 1. Taking this important step will ensure you have all options at your disposal to finance a collegiate education.
About the author: Jason Anderson
Jason Anderson, CFP®, CPA, is the owner of Gradmetrics, a college and student loan planning company. He is also a Lecturer at the University of Kansas and incoming Ph.D. student in the personal financial planning doctoral program at Kansas State University.