The Free Application for Federal Student Aid is a universal form that all students in the United States can submit in order to receive government support to help pay for their education. The 2020-2021 form opened on their website on October 1st, 2019 and will be accessible to submit until June 30th, 2021. However, the sooner you submit, the better—and yes, you SHOULD submit one!
Before you sit down to fill it out, here are some things you need to know in order to get the most aid possible.
First of all, let us reiterate: you really must apply, no matter what you think about the outcome. It’s free to submit, remember? The worst mistake you can make is not doing anything because you assume you will get nothing. Even if you aren’t eligible for a grant, you could come away with a low-interest loan, an on-campus job or a scholarship you didn’t know about.
Plus, your financial situation may change over the course of a school year. You might begin your first semester classified as dependent and end the year as an independent. Or the finances of your parent or guardian may take a hit from an assortment of possibilities, such as illness, job loss or family crisis. If you need help mid-stream, the FAFSA on file will make the process much easier for you and the school finance department.
That said, financial disclosure isn’t necessarily easy, especially when you are required to submit documentation to back up your assertions. However, revealing information and filling out this free application may result in many unforeseen benefits.
This financial guide is intended to educate students, as well as provide expert college counseling tips on providing financial details and getting the most bang for your buck.
Hit the Earliest Deadline Humanly Possible
You can find the most accurate information about deadlines as they apply to you and your family right on FAFSA’s website. In all cases, however, you will want to apply as soon as you can. Funds are given on a first-come, first-served basis and the amount available per year is finite. Each school you apply to will have their own rules and timetable for aid allocation—make sure your name is in the pot before it’s all distributed out!
Providing Income Tax Information
The application will require you to provide income tax information for both the student and his/her parent or legal guardians. In the 2020-21 year, you may submit for 2018 as an estimate or what 2019 will look like. Once you receive your 2019 tax returns, you must replace the estimate with the actual 2019 return numbers.
To make things easier, the IRS provides a “retrieval tool” which will automatically transfer your tax information from the IRS to your FAFSA form. Plus, by using this tool to transfer the information directly, you may avoid being selected for “verification.” (The verification process doesn’t mean you are under suspicion or that you won’t get money, but it’s just an extra step of protocol and can be quite the hassle.) To utilize the retrieval tool, Go to the “Parent Financial Information Page” or the “Student Information Page” on your FAFSA and answer the questions you find there. Your answers will determine if you are eligible to use the tool. If you are eligible, then choose “Link to the IRS.” After reviewing the information you will see displayed, click on “Transfer My Information into the FAFSA,” and move on to the next step…
Estimate Your Costs for the School Year
First, determine which schools you want to attend. You are allowed to list up to ten schools on the application. Your application information will be forwarded to each college and university you list, enabling financial departments to have your information at hand to determine your financial need and provide any aid on the school level. (Note: Each college and university in the United States has an assigned code number. You will need to know and list the codes on the application. Go to this database to find the correct code.)
School costs can vary widely, so after determining your school choices, estimate your costs of attendance at each school. You aren’t required to include the estimates on your application. However, you can use the cost calculations to ascertain the amount of financial aid you may qualify for. Consider the following when estimating your costs for each school and its location:
- Tuition and fees
- Room and board
- Books and Supplies
- Miscellaneous expenses
Some universities offer their own estimates. Investigate specific school websites to find this information. There are other helpful sites as well. In fact, there is a site that provides ten free online calculators to guide you. Check out this resource for more information.
Calculate Your EFC (Expected Family Contributions)
There is a mathematical formula used to calculate your “expected family contributions,” or EFC. The financial information provided on your application determines the calculated result. Important detail: if you are a dependent student whose parent(s) or guardian(s) aren’t planning on contributing financially, the financial information and subsequent calculations will still determine your needs. The calculation can vary depending on familial circumstances. The application asks for various details and decides your status by analyzing your responses to specific questions. For example,
- How many other family members reside in your home?
- Is anyone else in your family currently attending college?
- Are you a ward of the court or in the foster care system?
- Are you emancipated?
There are several other inquiries on the application. Just be as thorough as possible and include all potentially relevant details.
Determine Eligible Financial Aid Amount
Once you have the estimates for college costs and EFC, simply take the college costs and subtract the EFC. This will be the amount of financial aid you may qualify for.
Expert Financial Tips
Gen and Kelly Tanabe at www.supercollege.com offer several expert tips to lower EFC obligations and optimize college finances.
- Any funds or assets (savings accounts, stocks, savings bonds, trust funds, real estate) in the student’s name will be assessed by 20 percent. But if that same money is in a parent or guardian’s name, the money will only be assessed by 5.65 percent. So for every $100 in the student’s name, you will be expected to spend $20 toward college expenses. When the same $100 is in a parent’s name, you will be expected to spend only $5.65 toward college expenses.
- The same goes for gifts from relatives. If given in the student’s name, the funds will be assessed at 20 percent. Therefore, ask relatives to give monetary gifts in the parent’s name so the funds will be assessed at 5.65 percent. Another solution is to ask for relatives to wait until your student has graduated.
- Watch the clock when you sell stock. If your stock has gained value and you sell when the student is a junior in high school, or in the same year he/she is starting college, the earnings will be considered income. Parental income from stock sales can be assessed up to 47 percent, while student income will be assessed at 50 percent. On the other hand, if you sell the stock before January 1st of the student’s junior year in high school or in the calendar year prior to the student starting college, the funds will be considered an asset. As a parental asset, the money will be assessed at 5.65 percent. For students, the asset assessment rate is 20 percent.
- Use a 529 Savings Plan to lower financial assessment rates. Any monies donated by way of a 529 Savings Plan are considered assets. Coverdell Education Savings Accounts are also considered parental assets. As assets, the monies will be assessed at the lower parental rate.
- Though following these tips will improve your chances to receive aid, there are good tax reasons for putting some money in the student’s name, especially if you won’t qualify for need-based financial aid. Therefore, you need to balance saving on taxes with the effects on assessing the expected family contribution (EFC). Consult with a financial advisor to determine how you can benefit the most.
Other financial questions may arise. The most comprehensive site is the official FAFSA site. With a bit of reading and research, the FAFSA itself can provide the answers to any question regarding the federal financial aid process.
If you are still truly confused by all of this information, don’t fear! Sometimes it’s easier to have someone sit down and walk through it with you. If that is what you prefer, schedule a consultation with one of our partners at SmartTrack and mention Empowerly for a free review of your finances and get your questions answered by a live person!