What is the FAFSA?

June 28, 2021 by First Federal Bank

FAFSAIf one or more of your children is getting ready to start looking at colleges, there are a ton of things to think about. Since educationdata.org states the average yearly cost of attendance at a public institution is more than $25,000, one of them is probably trying to figure out how to pay for it. That’s where the FAFSA, or Free Application for Federal Student Aid, comes in.

The basics of the FAFSA

According to Farran Powell and Emma Kerr at U.S. News, “the U.S. Department of Education awards around $121.8 billion in federal grants, loans and work-study funds” that go to “assist roughly 10 million students in completing their education.” Even with a sum that large, there are only so many resources to go around. As such, the DOE needs a way to make sure only the people who genuinely need financial help to get a quality education receive loans.

Need is determined through the FAFSA, which Investopedia’s Lita Epstein describes as “the official form students or their families use to apply for financial assistance for college from the federal government.” In essence, it’s a questionnaire about your financial situation that you or your child fill out to see how much aid you qualify for.

Who qualifies for aid?

If you’re considering filling out the FAFSA, it’s important to know what metrics the government uses to decide how much assistance to give you and what kind. The form will ask questions about household income, number of dependents, and any additional assets or investments. Epstein notes, though, it disregards, “The value of retirement accounts, life insurance policies, and annuities,” as well as any equity in the family home.

That information is then compiled into something called an Expected Family Contribution, which determines the type and degree of the aid you may receive. Powell and Kerr state, “If the EFC is zero, then the student will most likely qualify for a Pell Grant — a federal award based on financial need.” If your annual household income is $27,000 or less, your EFC is automatically counted as a zero.

It‘s important to note that the government may still offer you aid in the form of scholarships, work-study programs, and more if you don’t get a Pell Grant. There is no income limit, so experts like Ilyan Nunez, director of college and career placement at KIPP New Jersey, say “all families should submit a FAFSA whether they think they will qualify for aid or not.”

How to prepare

Since the FAFSA is a government document, there’s very little room for error, and you should make sure you’re set up for success. StudentAid.gov suggests starting as early as possible and to “ask school counselors and the college financial aid office about state, college, and nonprofit grants and scholarships.” You should also be conscientious of deadlines, as letting them pass by could bar you from receiving aid.

Additionally, it’s important to make sure you have all of the necessary files on hand before filing the FAFSA. Mark Kantrowitz, publisher and vice president of research for Savingforcollege.com, suggests making sure you have all of the pertinent important documents, such as Social Security cards or Driver’s Licenses for U.S. Citizens and Permanent Residence cards for eligible non-citizens. Then make sure you have records relating to income, assets, and investments.

Finally, have at least one college ready to list. You don’t need to apply before filling out the document, but it won’t be accepted unless there is one college included. Kantrowitz says, “It is a good idea for the college to be an in-state public college, since listing a state college first is often required for the student to be considered for state grants. You can add more colleges later.”

Getting an education is expensive, and filing the FAFSA is one of the best ways to take some of the sting out of that cost without lowering your standards.

Categories: Financial Education, Family

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