An important date is coming up this fall, and we’re not talking about the presidential election! It is an important date for college-bound students, and it relates to the FAFSA.
What is the FAFSA? The FAFSA (Free Application for Federal Student Aid) is a form that college students and their parents use to apply for federal financial aid, including loans and grants. The FAFSA will be available for the 2021-2022 school year on October 1st, 2020, but the deadline to complete it isn’t until June 2022. However, we do not recommend you wait to apply. Applying early can only help you because awards are often distributed on a first-come-first-served basis. Also, states and schools have different deadlines, so applying as early as possible is key.
Some misconceptions exist about who should or shouldn’t apply for the FAFSA, but the reality is that all college-bound students should complete the application. Regardless of income, net worth, or other financial considerations, it’s worth your time to complete this application. Here are some reasons why:
While a need-based aid application is generally not required in order to be considered for non-need-based scholarships, this is not always the case. Some colleges actually require a FAFSA in order to consider you for some non-need-based scholarships. For example, in order to be eligible for Georgia’s Zell Miller Scholarship or the Hope Scholarship, you must complete the FAFSA (unless you complete a GA Scholarship/Grant Application).
Completing the FAFSA, even if you plan to pay for college without using federal aid, demonstrates interest in the school, and some private scholarships require a FAFSA submission.
A family may experience a change in financial circumstances, and colleges will not accept applications for assistance after the deadlines. Completing the FAFSA and having it on file leaves open the possibility of qualifying for funds if your family’s financial situation alters. This measure is extremely important now because the information regarding income is used from the “prior prior” tax return. So, when you complete the 2021-2022 application, you will use your 2019 tax return. Due to Covid-19, the number of appeals is expected to be much higher because many families have experienced income reductions. To appeal for new financial aid, contact the university’s financial aid office since the process for each school varies slightly.
A family may choose to have their child take on some responsibility for financing his/her education. Students may qualify for federal non-need-based loans, and in order to be eligible they must submit the FAFSA. Federal student loans carry lower interest rates and offer various repayment options.
Under some circumstances, a family may not qualify for aid with one child in college, but if you have more than one child in college at the same time, your chance of qualifying for aid jumps significantly.
What kind of financial information is used for the FAFSA?
Assets, income, the cost of attendance at the desired school, and much more get factored into the decision about how much aid a student can receive. Retirement assets are not counted and neither are home equities and small businesses. Non-qualified annuities and life insurance cash values also don’t count. Assets in the student’s name count at approximately 20%, and assets in the parents’ names count at roughly 5.64%. 529 accounts in the student’s OR the parents’ names will count as a parent asset (lower % counted).
Important acronyms/formulas and final tips:
EFC (Expected Family Contribution): The output of the aid forms, this formula calculates the cost of college that is expected to be family-funded. Income, assets, family size, number of family members in college at one time, and the state of residence are all included in calculations. Keep in mind that this isn’t the amount you’ll end up paying; the number goes into the calculation that the school uses for distributing aid.
COA (Cost of Attendance): Includes tuition, fees, room, and board.
COA-EFC: Financial need
The FAFSA should be completed each year the individual is in school. It’s not a one-and-done application.
An easy way to complete the FAFSA is by going to fafsa.gov.
Items to have handy when filling out the FAFSA (for both the student and parents):
- Your Social Security number
- Your federal income tax returns (prior prior), W-2s, and other records of money earned. (Note: You may be able to transfer your federal tax return information into your FAFSA using the IRS Data Retrieval Tool.)
- Statements for assets
- Records of untaxed income (if applicable)
- An FSA ID to sign electronically
- A list of the schools you are interested in attending
In addition to the FAFSA, the College Board’s CSS Profile also becomes available on October 1st. Only certain schools (listed on the CSS Profile site) use the CSS Profile as part of their financial aid process for aid like grants and scholarships. The CSS Profile will collect more information than that FAFSA and does not take the place of the FAFSA; it is an additional application. In this article, we focused on the FAFSA, but to learn more about the CSS Profile, click here: https://cssprofile.collegeboard.org/
As always, the Bluerock team is here to answer any questions!