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. Colleges award financial aid and scholarships based on the information parents and students put into these forms, so students and parents must 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.
According to research by the National Council on Education Statistics, an estimated 35% of students don’t fill out the FAFSA every year. 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 assistance.
- They’re reluctant to take on debt.
- They lack information about how to complete a FAFSA.
The reality? College is costly, so getting assistance matters. 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. And many students will qualify for some assistance, so you must fill out these forms. Here’s what you need to know.
What’s New in 2020
The 2020 FAFSA (for students attending college in the 2021-22 academic year) involves several changes:
- Families making less than $27,000 a year (after adjustments) will have a zero Expected Family Contribution (EFC).
- The Department of Education has made updates to the IRS Data Retrieval tool to ease data transfer from your 2019 taxes.
- A summary of changes for the 2021-22 academic year is posted online at this link.
FAFSA Screen Snapshots
The government has a good presentation that walks through the FAFSA screen by screen. You can view it below.
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 the student and the parent need an FSA ID to connect 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 the “prior-prior” year’s tax returns. That means that to fill out the FAFSA for the academic year 2021-22, you need the parents’ and student’s tax returns for 2019. 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. 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 aid eligibility, so the parent’s citizenship 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 that 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, your home’s value, and business assets. These are valued as of the date you file the FAFSA, so it’s essential 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 relatively easy for most people. The FAFSA for 2021-22 opens on October 1, 2020.
You can also walk through a demo with test data at this link.
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. Parents’ marital status 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, or parents who refuse to provide information: Click here for details.
- Low-income students or families who qualify for specific 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. In other situations, the government will disregard asset information in calculating the EFC (this is known as the “simplified needs test”): Click here for details.
Sheltering Assets to Minimize EFC
You don’t have to report all assets on the FAFSA. So some families with significant investments can use strategies to shelter assets. For example, you don’t have to report:
- Small-business assets and the value of equity in a small business owned by a parent
- The value of your primary home
- The value of retirement accounts
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 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, which is very significant. It also determines eligibility for programs such as veterans or servicemembers’ benefits.
State Grants: Many states also offer residents financial aid 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 assistance 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.