Getting the most out of federal student aid
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- 2017-2018 FAFSA Deadlines, https://fafsa.ed.gov/fotw1718/pdf/Deadlines.pdf; Accessed Sept, 2017
- Student Aid Report, https://studentaid.ed.gov/sa/fafsa/next-steps/student-aid-report; Accessed Sept, 2017
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- If you're not ready to apply for federal student aid, but you'd like to estimate your aid, try FAFSA4caster, https://studentaid.ed.gov/sa/fafsa/estimate; Accessed Sept, 2017
- Once your Free Application for Federal Student Aid (FAFSA) has been processed, you may make certain types of changes to it, https://studentaid.ed.gov/sa/fafsa/next-steps/correct-update; Accessed Sept, 2017
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As you sweat out your standardized test scores and get your high school transcripts together for college applications, you might get the impression that the challenges involved in pursuing a degree are primarily academic. For millions of students though, there is an even bigger barrier - paying for college. Understanding the ins and outs of federal student aid can help you overcome that barrier.
According to the US Federal Reserve, by the second quarter of 2017 the total amount of student loan debt outstanding was approaching $1.5 trillion, a figure that had doubled in less than a decade. Large numbers like that can seem somewhat abstract, but the real world effect is that a generation is graduating from college saddled with a student loan burden that will affect them for years to come. The average debt burden among people with student loans is $34,000, and experts believe this is forcing young adults to delay decisions such as getting married and buying a home, just so they can get a handle on their debt.
A little time invested in understanding the process for getting federal student aid can increase the assistance you get for college, and thus reduce the financial burden on you for years to come. It all starts by getting to know something called FAFSA - the Free Application for Federal Student Aid.
Get acquainted with FAFSA
The federal government awards more than $120 million a year in student aid, and these awards are managed through the FAFSA process. You can think of FAFSA as a universal financial aid application, but it is also more than that.
If you've been slogging through a variety of different college admissions applications, you will be pleased to know that while there are a variety of federal student aid programs, the FAFSA application covers them all. In addition, some states use the same application to determine their financial aid awards, as do some more local programs.
Once you file your FAFSA information, the government creates an account for you that allows you easy access to your information so you can review and update it as needed. In addition, the FAFSA website includes a variety of other relevant information, such as application deadlines and figures on college costs.
In short, the FAFSA website is a gateway to a variety of financial aid sources, so starting your account on that website is a key first step towards easing the financial burden of college.
How federal student aid is determined
Federal student aid is administered through a variety of programs, but generally speaking it is based on need. A formula takes into account your family's income and assets, and uses a detailed formula to calculate how much your family should be able to contribute to your college expenses - a figure that is referred to as the Expected Family Contribution (EFC).
The difference between the cost of the college of your choice and your EFC represents the maximum federal aid you are eligible to receive. Note that because the EFC is subtracted from the cost of college in determining your eligibility for financial aid, the lower your EFC, the more aid might be available.
The EFC takes into account financial information for both you and your parents. If you are parents are divorced, then the parent with whom you lived with the most over the prior year is the one whose finances are used for the purposes of the calculation. Also note that your savings count more towards the EFC than those of your parents. Since a larger EFC reduces your eligibility for aid, when saving for college it is better to have accounts in your parents' name than your own.
While the formula for determining financial aid eligibility is fairly complex, the FAFSA website has a tool called the FAFSA4caster that will estimate how much aid might be available to you. This tool can be valuable for your early planning, and may also help you understand your eligibility for various forms of aid.
Note that the amount of aid you are eligible for represents the maximum you can get, but you may not get the full amount. Federal student aid programs are limited, and in high demand, so the dollars cannot always be stretched to meet the full demand.
In addition to eligibility based on financial aid, there are other eligibility criteria. You have to be a US citizen or a permanent resident alien, and once you are enrolled in school you must remain on track for graduation.
Tips for using FAFSA
With that as general background, the FAFSA website can walk you through the application process. However, as you gather the necessary information for this process, keep in mind the following tips:
- File well before the deadline. The good news is that you can actually file for financial aid after the completion of the school year in question. For example, the application deadline for the 2017/2018 school year is June 30, 2018, and corrections and updates can be made until September 15, 2018. The bad news is that since federal aid programs often don't have enough funding to meet the demand, if you wait too long you may find the money is used up before you apply. Plus, some state and local programs that use the FAFSA have much earlier deadlines. So, your best move is to get your application in as soon as you can once the form is available, which is usually on January 1 prior to the start of the school year.
- File online. You have a choice between filing online or via a paper form, but processing time is typically much faster if you file online. Plus, this will enable you to review and update your information online at any time.
- Don't over-report assets. Note that while most of your savings and those of your parents (including Section 529 college savings accounts) count towards determining your EFC and thus reduce your eligibility for aid, retirement plan assets should not be included. Fill out the FAFSA honestly, but since family assets and income count against you, be sure you don't include anything you don't have to.
- Get the right parental information. If your parents are unmarried, your living arrangements can be instrumental in determining your eligibility for college aid. Depending on your circumstances, in the year prior to filing your FAFSA application it might even be worth shifting your legal residence to that of the parent with less income and assets.
- Do a dry run with the FAFSA4caster. First of all, don't assume that because your family is reasonably well off that you will not be eligible for aid. You may at least have something coming, especially if you are applying to an expensive college. Use the FAFSA4caster tool to see what you might get, and to see how adjusting certain variables might impact your eligibility for financial aid.
Getting more out of federal student aid
If you are disappointed with the amount of federal student aid you can get, here are some ways you might be able to increase that amount:
- Apply to multiple schools. A key point about federal student aid - it is distributed through the schools themselves, so the expertise of the financial aid office can make a difference in how much aid you are awarded. Different tuition costs can also affect how much aid you are eligible for, and each financial aid office will have access to different state, local, and school-specific aid programs. When evaluating costs of different colleges, you should focus on the net difference between the stated cost of attending and the amount of financial aid the school is able to offer you.
- Scrutinize your Student Aid Report (SAR). Shortly after you have filed your FAFSA information, you will receive an SAR. This is a report summarizing the information you submitted, and providing you with the all-important EFC figure that was calculated based on that information. Remember, the lower the EFC, the more aid you will be eligible for, so seeing this figure will give you an idea of where you stand in terms of eligibility for aid. Also, you should review all the information on your SAR to make sure it has been recorded correctly.
- Make any updates/corrections to your application. If the SAR reflects any incorrect information, or if anything has changed since you filed your FAFSA, you can make changes either online or by filing a paper form. It is advisable to make these changes as soon as possible.
- Make a fact-based case to your school's financial aid officer. These officials are generally experienced with the federal aid system, and they also may have access to other forms of aid. In other words, they are good allies to have. The more you can appeal to them with a fact-based case focusing on both any extenuating circumstances in your family's financial situation and your value as a student, the more likely they are to go the extra mile in trying to help you.
- Revisit the process each year. The student aid award you receive as a freshman is not locked in for your remaining college career. Circumstances change, so be sure to keep your FAFSA information updated to reflect that.
Paying for school is a big challenge, but the time you spend working on your FAFSA to get the most federal student aid you can will make that challenge easier to meet both when you are enrolled and when it comes to paying off loans afterward.