The FAFSA: What You Should Know

The Free Application for Federal Student Aid (FAFSA) is required by all college and university financial aid departments in order to award any type of Student Aid.  That normally includes scholarships!  So if you have been told you will be receiving a scholarship of any type, you will most likely be required to submit a FAFSA before your scholarship can be posted to your financial aid award.  Whether your family income is less than $20,000 or more than $200,000, you will need to submit a FAFSA every year you are in college.  The information required on the FAFSA (income, number in the household, number in college and assets) will be used to calculate your family Expected Family Contribution (EFC) number. This tells the college how much your parents or you can afford to pay toward your education for next year. So the lower your EFC number is, the more money you may be offered by your college.

There are three things that are important for your FAFSA:

  1. File it Early
  2. Be sure it is Accurate
  3. Do Follow-Up

We will look at the first two in this post and the third will be addressed in our next post.

Early

The FAFSA is available for each new school year on January 1st and it should be completed as soon after that date as possible.  If all the colleges you are considering are in Texas, our advice is to complete it before March 1st which, in most cases, will be the priority deadline for financial aid. If you are looking at out of state colleges, check with them for the Priority deadline.  Many experts nationwide have started recommending as early as February 1st and you may be applying for a scholarship that requires it to be submitted even earlier. The priority deadline is the date that colleges start awarding funds and, since everything besides Federal Pell Grant or Student Loans is awarded on a first-come first-served basis, you want to be first in line! You are actually eliminated from some state programs such as the Top 10% Scholarship if you don’t complete it before March 1st.  The financial aid deadline is very different from the priority deadline so don’t be fooled when you see a deadline posted on your college’s website; the financial aid deadline is the last date you can submit it and expect an award package for the upcoming semester.  The Priority deadline is the best-if-completed-by deadline. You do not have to wait until you make the final decision on the college you plan to attend to complete the FAFSA. You can list all your possibilities up to 10 schools so that should cover your choices. So apply Early to receive the most money.

Accurate

Since the FAFSA determines how much money you will receive, you should make sure it is accurate! The reason it is only available after January 1st is that you will need the previous year income information on yourself and your parents or spouse. (See here for more information about dependency.)

The information you will need is as follows:

  • Income information – You can use yours and your parents’ Income tax return, if it is already completed. Most people don’t have their return that early so you can do the FAFSA with an estimate and correct it later.  This will put you in line for money on the date you have filed it with the estimate, however don’t wait too long to enter the new information because at some point the college will be forced to by-pass your application if it isn’t correct. To get a good estimate you can use W-2 forms or last year’s tax return if income hasn’t changed much.  You should also have available other income information such as child support, or retirement benefits that were received during the year. If you or a parent paid out child support for another child, you should also have the amount that was paid during the year.  This information will help you because it reduces the income used in the calculation.
  • Number of people in your household – use parents household if you are dependent or the number in your household if you are independent.  Always include yourself in parent household even if you no longer live there. If you are independent due to marriage or a child you support but live with someone else, parent, grandparent, sister etc., you should only show your family that you are responsible for, for example: spouse and/or child and yourself
  • Number in college – count yourself and any siblings you have that will also be in college during the next school year. Do not count a parent that is in college.
  • Assets – Parent assets will include the amount of money they have in bank accounts, any property they own other than their home, any stocks they own that are not part of a retirement plan and any educational saving plans. They will not include retirement plans, their home, their business if it has less than 100 employees or their farm if they live on any part of the farm. Student assets are where you need to be careful!  Your parents will have a deductible amount before any of their assets count against you in the EFC calculation and even if they go over their deductible, which few parents do, only about 5% of the amount over the deductible is used in the calculation. However, dependent students do not get a deductible and all of their assets will be considered in the calculations.  This means that if you have $5,000 in your bank account you could lose $2-3,000 in financial aid because of it. So what you need to remember is it asks for your current balance of your bank accounts meaning as of the day you complete your FAFSA.  Therefore, take advantage of this loophole and make sure your accounts are as low as possible on day you submit your FAFSA.  If your account is a joint account with a parent, check to see whose social security number is on the account.  If your social security number is on it, then you must report the account as yours so you may want to move some money temporarily. If it is under your parent’s number then it should be added to their assets. Educational savings plans or IRA’s are considered a parent asset even though you are a beneficiary. So make very sure you don’t mistakenly show assets for yourself that you don’t have to!
  • Parent and Student Social Security numbers and Dates of Birth are required. If a parent doesn’t have a social security number you should enter 000-00-0000.
  • If parents are married or divorced you will need the month and year that occurred.
  • If you are not a citizen you will also need your Alien Registration Number.  If you have a social security card that is stamped “For Work Purposes Only” you will need to complete the Texas Application for State Financial Aid (TASFA) instead of the FAFSA because you are not eligible for federal money but you could be considered for state funds.

The FAFSA is a “smart” form and it may skip some of the questions based on your answers to other questions and that is perfectly alright.  So you may not be asked for Asset information for example. It also triggers additional questions based on other answers, so you may be asked questions like whether you or your siblings are on a free or reduced lunch program or if your parents receive food stamps. So don’t be worried if you are asked different questions than someone else who has completed the form.

That’s all for now. Stay tuned for our next post where we’ll talk about the importance of Following Up!

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