What Is the FAFSA and How Does It Work?

By
,
March 6, 2018

In a perfect world, everyone would qualify for full financial aid. However, in reality, those pools of funds are limited, and there must be a way of determining who really needs financial assistance to attend college.

That's where the FAFSA—the Free Application for Federal Student Aid—comes in. Almost like Hogwarts' Sorting Hat, it sorts out which students are eligible for what types of financial aid, and how much. Here, we aim to answer the most common FAFSA-related questions we hear from CommonBond members, from what it is to how (and when) you should fill it out.

What is the FAFSA?

At its core, the FAFSA is just a form you fill out to see if you're eligible for undergraduate or graduate financial aid. The FAFSA is administered by the Department of Education, and the results that it presents are then given to your college or university's financial aid office. It assesses your and your family's financial situation to determine how much you can afford to pay for college.

If you're a dependent student, you'll need to fill this form out with your parents. If you're an independent student, you may not need your parent's input on this form; however, you will need your spouse's information if you're married.

When you've completed the form, it will generate a Student Aid Report (SAR) which details your Expected Family Contribution (EFC) to your education. When you first see this number, you might panic because it's so large, but know this: it's not how much money your family has to pay. Rather, it's a number that your school will use to determine your eligibility for federal, state, and private financial aid (such as scholarships).

To figure out how much financial aid you're eligible to receive, your school will subtract your EFC from the average Cost of Attendance (COA). The bigger the difference, the more financial aid you will receive. For example, if your school's COA is $40,000 per year and your EFC is $30,000 per year, you'll be eligible for $10,000 worth of financial aid.

Should I fill out the FAFSA?

Yes. The only way to know for sure whether you qualify for governmental aid is to complete the FAFSA. While the amount of financial aid you qualify for depends on many, many factors, it's generally always a good idea to check your eligibility. Even if you only qualify for federal subsidized student loans, that can still help you minimize your debt burden in the long run.

How do I fill out the FAFSA?

The FAFSA gets a bad rap for being difficult to fill out, but it really only takes about an hour, and if you have the documents at hand before you get started, it will be even faster.

First, you and your parents (if applicable) will need to apply for an FSA ID. This will allow you to log on to the Department of Education's websites, including StudentLoans.gov and the FAFSA website.

For most people (and their spouses or parents, if applicable), these are the documents you'll need:

  • Social security and driver's license numbers
  • Most recent tax return and the accompanying documents (W2s, 1099s, etc.)
  • Bank account and investment statements
  • Untaxed income records (such as alimony or VA benefits)

Try to fill out the FAFSA as soon as it becomes available for your school year (you can check out the schedule here). A lot of financial aid is given out on a first-come-first-serve basis, and getting your application in early can net you more money. However, if you've waited, it's still worthwhile to file and see what you're eligible for.

What kind of financial aid might I qualify for?

Financial aid generally comes from four sources: the federal government, state governments, your college or university, or private scholarships.

The federal government might offer you student loans, some of which may be subsidized (in other words, the government pays interest on the loan while you're in school, so the loan balance doesn't grow larger until you start paying it back). You might also be eligible for federal work-study, where you work on campus to earn cash, or you might be awarded a Pell Grant which does not have to be repaid.

Financial aid from state governments, colleges, universities, and private foundations is a bit more piecemeal, but generally takes the form of scholarships which also usually don't need to be repaid. These scholarships may or may not use your FAFSA information, but generally they will require you to complete a separate application.

What's going to happen to the FAFSA in the future?

The FAFSA was put in place by the Higher Education Act of 1965, which has been reauthorized every few years, keeping the FAFSA in place.

Currently, the Higher Education Act is up for reauthorization. The latest iteration of the legislation, called the PROSPER Act (Promoting Real Opportunity, Success, and Prosperity through Education Reform), proposes making a mobile-friendly version of the FAFSA and allowing you to connect directly with your tax records at the IRS, instead of looking up and providing the information yourself.   

We might see additional changes to the financial aid system, but as of early 2018, they're still just proposed changes. So, it's still a good idea to fill out the FAFSA, see how much aid you qualify for, and look into private loans to fill in the gaps.

You might also enjoy