It's that time of year! If you have a student entering or returning to college in the fall of 2023, the financial aid application process begins soon. An hour of your time could mean thousands of dollars for tuition and expenses. Don't make the mistake of assuming you don't qualify. It's worth your time to check!
If there are thousands of dollars at stake, you would expect most parents and students to be anxious to apply. But unfortunately, that's not always the case. A study completed earlier this year by National College Attainment Network (NCAN) found that only 54% of the class of 2021 graduates completed FAFSA, leaving $3.75 billion in Pell grants (essentially free money) on the table.
The financial aid process begins with the completion of the Free Application for Federal Student Aid (FAFSA). Colleges use FAFSA to determine the federal aid eligibility for each student. Many states and colleges also offer financial aid and use completed FAFSA forms to make awards. Federal financial aid is a combination of grants, loans, and work-study funds the federal government provides.
The student's financial situation determines the amount of aid available to them. Both dependent students and parents must provide information to complete the FAFSA. To receive financial aid, a FAFSA must be filed before each year of college.
Applications are submitted online at www.studentaid.ed.gov. If you have all the necessary information, completing the FAFSA should take only 30 to 60 minutes! What makes it so easy? The IRS data retrieval tool transfers your most recent tax data directly from the IRS, making what used to be a daunting process somewhat easier.
Applications for the 2023-2024 school year become available on October 1, 2022, and technically the submission deadline is June 30, 2024. However, financial aid is available on a first-come, first-served basis, and certain types of aid deplete faster than others. Therefore, filing sooner rather than later is highly recommended. Individual states and colleges will have their deadlines as well.
The first step in the FAFSA process includes creating an FSA ID if you don't already have one. The FSA ID is a username and password combination that allows an electronic signature of the FAFSA form. While it's possible to obtain your FSA ID as you're completing the FAFSA form online, having the FSA ID readily available cuts down on errors and delays. Both the dependent student and parents will need their own FSA IDs. Visit www.studentaid.gov for more information on FSA IDs.
Next, you'll want to gather the following personal and financial information for both the dependent student and parents to complete the FAFSA form:
- Social Security number
- 2021 tax return (can now be gathered via IRS data retrieval tool)
- Untaxed income information, including child support received, interest income, and veteran's non-education benefits
- Checking/savings account balances
- Investments including stocks, bonds, and real estate
- Business and farm assets
- 529 plan balances
Excluded from reporting are retirement plans, the value of your primary residence, the value of a farm that is part of your primary residence, life insurance, and ABLE accounts.
If your family's financial situation has changed significantly from what is reflected on your 2021 tax return, contact your school's financial aid office to explain how your situation has changed after submitting the FAFSA form. Then, the school will determine how to proceed.
As previously stated, the dependent student and parents must provide their financial information when submitting FAFSA. If the student's parents are divorced, only the custodial parent the student lived with more during the last 12 months must provide the information. If the student spent equal time with both parents, then the parent who provides the greater amount of financial support completes the FAFSA.
What if that parent is remarried? That parent, along with the stepparent, will need to provide their financial information when completing FAFSA.
Show Me the Money
After submitting the FAFSA, you should receive a Student Aid Report (SAR) within three weeks. The SAR is simply a summary of the information you provided on the FAFSA and does not outline your financial aid options. If you notice any errors, you can and should submit corrections!
The schools you listed on the FAFSA will also receive your financial information, and each will calculate the aid you are eligible for at that particular school. Next, you will receive an award letter from each of your selected schools explaining the financial aid package it offers.
Make sure you understand every aspect of these financial aid packages! Some aid won't need to be repaid (grants), and other funds might be a combination of different types of loans. Don't be afraid to ask questions!
The FAFSA is the foundation for receiving financial aid, whether need-based or non-need based. So even if you think you won't qualify, taking 60 minutes to complete it could be well worth your time.
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We have helped our clients answer these questions and more. If you want a clear understanding of your financial future, and need help making changes to reach your goals, schedule a consultation and we can get started.
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