October 1 each year is the date that students and parents can start to fill out the federal government’s Free Application for Federal Student Aid (FAFSA) and the College Board’s CSS/Profile form. These forms are the basis on which colleges decide financial aid, so it is important students and parents fill them out.
This piece focuses on what you need to know about filling out the FAFSA. For information on filling out the CSS/Profile, please read the companion piece.
Every year, an estimated 35% of students don’t fill out the FAFSA, according to research by the National Council on Education Statistics. The most common reasons why are that students (and parents) believe, incorrectly in many cases, that:
- They can afford college without financial aid.
- They’re ineligible or may not qualify for financial aid.
- They’re reluctant to take on debt.
- They lack information about how to complete a FAFSA.
The reality? College is very expensive. Some colleges cost as much as $280,000 for a four-year degree. The average student pays between $80,000 and $120,000 for their college education. So getting assistance matters. And many students will qualify for some assistance, so it’s important to fill out the forms. Here’s what you need to know.
Determining your Expected Family Contribution
The purpose of filling out the FAFSA is to determine a family’s Expected Family Contribution (EFC), which is a number that measures (often, very inaccurately) how much money your family can afford for education.
Start by Getting FSA IDs for both Student and Parents
A Federal Student Aid (FSA) ID is a one-time username and password both student and parent need to get that connects their FAFSA to their social security number and taxes. Getting one is easy, so do it right away. Instructions are at this link on the Department of Education’s website.
Get Your Tax Returns and Financial Records Ready
Both the FAFSA and the CSS/Profile use “prior-prior” year’s tax returns, which means that to fill out the FAFSA for the academic year 2020-21, you need the parents’ and student’s tax returns for 2018. 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, and doing that is important, as it’s much less likely your FAFSA will be flagged for verification by colleges.
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 eligibility for aid, so the parent’s status isn’t relevant. The FAFSA doesn’t ask about the parents’ immigration status (NOTE: According to the American Civil Liberties Union of Northern Californa, 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 an SSN early, so you can have one in time. 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, the value of your home, and of business assets. These are valued as of the date you file the FAFSA, so it’s important 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 fairly easy for most people. The FAFSA for 2020-21 opens October 1, 2019.
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. The marital status of parents 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, parents who refuse to provide information: Click here for more information.
- Low income students or families who qualify for certain 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, or will disregard asset information in calculating the EFC (this is known as the “simplified needs test”): Click here for more information.
Sheltering Assets to Minimize EFC
You don’t have to report all assets on the FAFSA. So some families with significant assets can use strategies to shelter assets. For example:
- Small-business assets, as well as the value of equity in a small business owned by a parent, doesn’t have to be reported.
- The value of your primary home doesn’t have to be reported.
- The value of retirement accounts doesn’t have to be reported.
So for some families, it can be beneficial to move assets into a business, farm, or to buy a bigger home, and then borrow against that asset to pay for college. For a summary of some good asset protection strategies, click 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, so this is very significant. It also determines eligibility for programs such as veterans or servicemembers’ benefits.
State Grants: Many states also offer financial aid to residents through programs such as California’s CalGrant program. Qualifying for many of these programs requires you to file the FAFSA.
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 aid 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.
Some colleges require you to fill out the CSS/Profile. For those colleges, read the companion piece to this one on LifeLaunchr’s blog.