Quick Guide to the FAFSA
Tis the season again! FAFSA season!
On October 1 each year, the new Free Application for Federal Student Aid (FAFSA) is made available. This is the central piece of (state and federal) financial aid for college. It’s the single most important thing you can (and should!) do as you prepare to send your student to college. All need-based aid is determined by the information on this form… and some colleges even require it before a student is eligible for merit-based aid (scholarships).
Are there some reasons NOT to complete the FAFSA? Well, some families think they won’t qualify for financial aid anyhow, so they don’t try. Some families don’t know how or where to do it. If you’ve got some questions, check out Savvy’s FAFSA FAQ page for some answers.
We really do recommend that everyone submit a FAFSA. It can only help!
Updates for 2020
The 2020 FAFSA (for students attending college in the 2021-22 academic year) includes several changes:
Families making less than $27,000 a year (after adjustments) will have a zero Expected Family Contribution (EFC).
The IRS Data Retrieval tool has been updated, to ease data transfer from your 2019 taxes.
A detailed list of other changes can be found here.
Ready to start?
START BY GETTING FSA IDS FOR BOTH STUDENT AND PARENTS
A Federal Student Aid (FSA) ID is the first necessary step. Both the student and the parent need an FSA ID to connect their FAFSA to their social security number and taxes. You only obtain this once, but you use it over and over each year, even through grad school! Instructions can be found on the Department of Education’s website.
GET YOUR TAX RETURNS AND FINANCIAL RECORDS READY
Both the FAFSA and the CSS/Profile use the “prior-prior” year’s tax returns. That means that to fill out the FAFSA for the academic year 2021-22, you need the parents’ and student’s tax returns for 2019, which are based on 2018 income. If you don’t have this return filed yet, you can estimate your income and amend the FAFSA when you have it.
The FAFSA makes it relatively easy to pull this information directly from the IRS. Doing that is important, as it’s much less likely your FAFSA will be flagged for verification by colleges, and it saves you a ton of time and headaches.
OTHER FINANCIAL RECORDS
Student and parent’s social security numbers. You might ask, what if you don’t both have them? The answer varies, and here are some useful links:
International (noncitizen) students, including permanent residents, refugees, asylum-seekers, DACA recipients, and others: Click here.
Students whose parents are undocumented: Remember, only the student’s immigration status or citizenship determines aid eligibility, so the parent’s citizenship status isn’t relevant. The FAFSA doesn’t ask about the parents’ immigration status (NOTE: According to the American Civil Liberties Union, there is still “some risk” in providing undocumented parent information on the FAFSA, because although “immigration enforcement authorities have never requested student FAFSA information in the past, … that could change in the future.”): Click here for the Department of Education’s guidance.
Americans without Social Security Numbers: You should apply for one! Click here for more information.
Records of untaxed income you received, such as child support you received, and of income you can exclude, such as combat pay, taxable scholarships, and child support you paid.
Asset Information, such as bank and investment account balances, your home’s value, and business assets. These are valued as of the date you file the FAFSA, so it’s essential to print and keep the records based on which you entered the data, in case you have to verify them.
FILLING OUT THE FAFSA
To fill out the FAFSA, visit https://studentaid.ed.gov/sa/fafsa and follow the instructions. It’s really not that complicated. The FAFSA for 2021-22 opens on October 1, 2020.
What’s the deadline for filing the FAFSA?? Well, every school’s deadline is different. But sooner is better. If you need a deadline, tell yourself that November 15 is a good deadline.
SPECIAL SITUATIONS
There are a variety of special situations that make the process more complex:
Divorced or separated parents: It doesn’t matter for the FAFSA whether parents are divorced, legally separated, or informally separated. Parents’ marital status for the FAFSA depends on whether they have “chosen to live separate lives, including living in separate households, as though they were not married.” Click here for more information.
Other circumstances relating to parental information, such as same-sex parents, or parents who refuse to provide information: Click here for details.
Low-income students or families who qualify for specific federal programs such as Medicaid or Free/Reduced School Lunches, or where one parent is a “dislocated worker” or “displaced homemaker:” In some cases, this can result in an automatic zero EFC. In other situations, the government will disregard asset information in calculating the EFC (this is known as the “simplified needs test”): Click here for details.
SHELTERING ASSETS TO MINIMIZE EFC
You don’t have to report all assets on the FAFSA. Some families with significant investments use helpful, ethical strategies to reallocate their assets. These assets, for example, are not reported on the FAFSA:
Small-business assets and the value of equity in a small business owned by a parent
The value of your primary home
The value of retirement accounts
So for some families, it can be beneficial to move assets into a business, farm, or a bigger home, and then borrow against that asset to pay for college. More information about asset protection strategies can be found here.
HOW YOUR FINANCIAL AID IS DETERMINED
Federal Financial Aid: The FAFSA determines eligibility for federal aid programs such as the Pell Grant, Federal Work-Study, and Subsidized Loans. Each year, the Department of Education awards about $150 billion in aid to students. It also determines eligibility for programs such as veterans or servicemembers’ benefits.
College Financial Aid: The FAFSA doesn’t determine how much additional financial aid any college will offer you. Each college makes that determination on its own, using different criteria. To understand what assistance you might receive, fill out the college’s net price calculator, which you can find on most college websites. Remember, many colleges require you to fill out the FAFSA even to consider you for merit scholarships.
College can be costly, that’s for sure. For most families, it is second only to the family home, in relative cost. Completing the FAFSA is an important step in making college as affordable as possible!