It's FAFSA Time!
October 1st is right around the corner, and if you've got a high school senior, that means it's time to start preparing for the FAFSA®.
What Is The FAFSA
First off, FAFSA actually stands for Free Application for Federal Student Aid. To apply for federal student aid for college, you need to complete the FAFSA form at fafsa.gov.
Federal student aid comes from the federal government (U.S. Department of Education). It’s money that helps a student pay for higher education expenses. Federal student aid covers expenses such as tuition and fees, room and board, books and supplies, and transportation. There are three main categories of federal student aid: grants, work-study, and loans. Check with your school’s financial aid office to find out which programs the school participates in.
Why Should You Even Complete It?
Even if you think there's no chance you'll get any financial aid, it's still important to fill out the FAFSA. Qualifying for need-based financial aid is in large part determined by your family's income, but don't let that deter you from filling it out. There’s no specific income cut-off to qualify for federal student aid. You may not qualify for grants, but filling out the FAFSA will at least help you qualify for some type of financial aid, even if it's just low-interest federal student loans. It's best to keep your options open at this point. While income is the main driver in determining financial aid, they look at other factors as well, including assets outside of retirement, family size and your year in school.
The FAFSA is also often important for scholarships. When you fill out the FAFSA form, you’re also automatically applying for funds from your state, and possibly from your specific college (eventually) as well. Some schools won’t even consider you for any of their scholarships (including academic scholarships) until you’ve submitted a FAFSA form. For all of these reasons, don’t make assumptions about what you’ll get. It's best just to fill out the application and find out for yourself.
When Should You Complete The FAFSA?
This year's FAFSA is available October 1st, 2018. You technically have until June of 2019 to complete it, but it's definitely best to get it done early. You have a better chance of qualifying for some grants and scholarships when you get yours submitted early.
When you fill out a FAFSA form, you are applying for federal, state, and school financial aid. Schools and states often use FAFSA information to award nonfederal aid, and their deadlines vary, so you'll want to apply as soon as possible. Check with the specific colleges you’re interested in to find out about their deadlines. State deadlines are listed at fafsa.gov.
What You'll Need In Order To Complete the FAFSA
1. FSA ID
First of all, you'll need an FSA ID for the student and a separate FSA ID for the parent. The FSA ID is a username and password you use to log in to several important U.S. Department of Education websites, including fafsa.gov, StudentAid.gov, and StudentLoans.gov. The FSA ID is your legal signature. Be sure to note your username and password because you’ll use your FSA ID every year you fill out the FAFSA application.
How to get an FSA ID? You can go to StudentAid.gov/fsaid to create an FSA ID. In order to set it up, you’ll need your Social Security number, full name, and date of birth. It's a good idea to provide a mobile phone number and email address when you make your FSA ID as well. That will make it easier to unlock your account, retrieve your forgotten username, or reset your forgotten password (not that you would ever forget your password, of course!). Be careful: an email address and mobile phone number cannot be used with more than one FSA ID. If you share an email address with someone else, then only one of you will be able to use that email address to create an FSA ID. Same thing goes for your mobile phone number.
2. Identifying Information
You'll also need identifying information to fill out the FAFSA. It will ask for your Social Security number as well as your driver's license number (only if you have a driver's license).
3. Prior Prior Tax Records
Next up you'll need your 2017 tax records (for the college year 2019-2020). They call it the "prior prior", which means if you are starting college in 2019, you'll need your 2017 (two years back) tax return. You'll need the student's 2017 tax return as well as the parents'. In most cases, you can actually import your tax information directly from the IRS using their data retrieval tool when completing the FAFSA. Not everything pulls in, so you'll still want your 2017 tax return and W-2 for reference.
You cannot use more recent tax information, even if more recent tax return information better reflects your family's financial circumstances. If your current financial situation is materially different from what is on your 2017 return, you can contact an individual school directly to plead your case.
4. Records of Untaxed Income
You'll also need records of untaxed income. Untaxed income includes things like child support received, interest income, untaxed portions of health savings accounts (HSAs), veterans noneducation benefits, etc.
5. Statements for Non-Retirement Accounts
In addition to your income, the FAFSA will ask about your assets outside of retirement accounts. To prepare for the FAFSA, you'll want to gather statements for you checking and savings accounts, investment accounts, real estate (not including the home your family lives in), for both you and your child. The value of the assets is reported as of the data you sign the FAFSA form (unlike income with is from 2017).
Things get a little tricky when reporting assets. Make sure not to double count assets and make sure you know which are parent assets and which are student assets. Remember that 529 accounts are considered a parent asset (even if the student is named as the beneficiary). You'll also report your student's assets, which often includes things like checking and savings accounts, and sometime an UTMA as well. Accounts held in a student's name will hurt your chances of getting need-based aid more than accounts in the parent's name. See my blog post here for more details about how all of this information on the FAFSA is used to determine your family's Expected Family Contribution (EFC).
6. List of Schools
Finally, you'll want a list of schools your child is interested in. You can list up to 10 schools on your FAFSA form at a time. You should do this even if there is only a slight chance your child will apply to a college. Just go ahead and list the schools on the FAFSA anyway. You can always remove schools later, but if you wait to add a school, you could miss out on first-come, first-served financial aid. The schools you list on your FAFSA form will automatically receive your FAFSA results electronically. They will use your FAFSA information to determine the types and amounts of financial aid you may receive. If you add a school to your FAFSA form and later decide not to apply for admission to that school, that’s OK! The school likely won’t offer you aid until you’ve been accepted anyway.
That's it! Maybe that all sounds a bit overwhelming, but it's really not bad. If you gather the materials ahead of time, you should be able to compete the FAFSA in 20-30 minutes. The FAFSA is just one of the many hurdles you'll face as a parent of a high school student when preparing for college. If you'd like to learn more about the financial aspects of applying to college and how to make the most of financial aid (need-based and merit-based), I'd be happy to schedule a complimentary 30 minute call to talk more about your specific situation.
Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Alyssa Lum, and all rights are reserved. Read the full Disclaimer.