January 1st – it’s a day of resolutions, new beginnings, and for college students, the first day to apply for federal financial aid. The FAFSA, or the Free Application for Federal Student Aid, helps your family and prospective universities determine how much money you will be expected to contribute towards higher education. Don’t skip this one – it’s the only way to get federal grants and loans, and almost all colleges use the FAFSA to determine how much financial aid you will need. You can apply for the FAFSA online and through the mail.
Not sure if your family qualifies for financial aid? Apply for the FAFSA anyway. It’s free, and it only takes about an hour. With $80 billion in financial aid available, there’s no real downside to filling out the application.
Filling out your FAFSA
Do yourself a huge favor and gather all the documents you’ll need in advance. They include:
- Most Recent Income Tax Return: If you haven’t yet gotten your employer tax forms, use the “Will File” option on line 79. Estimate your income, and then go back and edit your response when your tax return is complete. Starting in February, you will also be able to directly transfer tax return information to the FAFSA.
- Current Bank Statements
- Current Investment Records
- Any Untaxed Income Records (This could include gifts over $14,000 that you’ve received in the last year)
- Driver’s License
- Social Security Number
- List of Prospective Schools
A few tips on completing your FAFSA:
- Use this worksheet to find out the state deadlines and to guide you through the process.
- You can save your progress and return to your FAFSA later if you would like. Make sure not to submit until you’ve reviewed every step and updated it with information from the past year. Financial aid is given out on a first-come, first-served basis, and submitting your application as early as possible means that you won’t miss out on aid for which you could be eligible.
- Even if you are a current college student and filed the form before, you must refile with updated information every year you plan on receiving financial aid.
- Things can get a bit difficult if your parents are divorced or separated. The FAFSA FAQ advises you to provide information for the custodial parent (whom yo’ve lived with most for the past year), or if your parents have joint custody, include the information for the parent who provided the most financial support.
Deciding to Accept Financial Aid
After you submit your application for financial aid, you will receive an award letter from the colleges you applied for, usually in mid-April. Designed to bridge the gap between the Cost of Attendance (COA) and your Expected Family Contribution (EFC), these award letters might include aid from a number of sources, including grants, work-study programs, and loans, as well as university scholarships and grants.
Review the letter(s) carefully.
When comparing and contrasting which college is offering the most financial aid, take into account the amount of “self-help” (i.e. loans and work-study) compared to grants and scholarships. Also consider any requirements a grant or scholarship might have. You might have to maintain a certain GPA to keep your scholarship – bear in mind that one bad grade can bring down a freshman’s GPA substantially.
Generally, accept grants and scholarships first, second work-study, followed by loans. Accept unsubsidized loans and government loans before taking out any private loans. Interest rates on federal student loans vary from 3-7%, and interest rates on private student loans tend to be more.
Don’t want to accept all of your award?
This is perfectly fine. You can accept all, part, or none of your financial aid award, by specifying and returning the signed award letter to your school of choice, or oftentimes by logging in to your college’s website.
The FAFSA might seem intimidating, but with a little preparation, you can start the new year right, and begin the new school year with a little more tuition money.