5 Important Things To Know About the FAFSA and Financial Aid
Dealing with financial aid and completing the FAFSA brings out lots of anxiety for parents. Here are 5 things to know about the FAFSA.
The FAFSA is used to determine your Expected Family Contribution (EFC).
Your EFC is basically what the government “thinks” you can afford to contribute to your child’s education. Once this number is determined it is compared to a college’s cost of attendance and the result is the need-based aid a student is eligible to receive. (Notice I said, eligible to receive, not does receive. There are still other factors that are involved before coming up with the actual net cost a student will end up paying.)
Below are a few examples. Notice your EFC is the same no matter what college you go to.
College A
$20,000 - Cost of Attendance
$12,000 - EFC
$ 8,000 - Financial Need Eligibility
College B
$10,000 - Cost of Attendance
$12,000 - EFC
$ 0 - Financial Need Eligibility
College C
$85,000 - Cost of Attendance
$12,000 - EFC
$73,000 - Financial Need Eligibility
For planning purposes, it is important to estimate your EFC well before your student completes the FAFSA in their senior year of high school. For sure if you have a freshman or older in high school you will want to get an estimate, but it isn’t a bad idea to get a rough estimate before that.
Many parents are shocked at this number when they first see it.
There are actually three different methodologies to arrive at the EFC. Most colleges use the federal methodology, but there are two others that some private and elite institutions will use. Many times these three numbers are similar but can widely vary depending on a family’s situation.
If you want to get a good estimate of your three EFC numbers click HERE to get a free college money report.
Even if you think you “make too much money” you should complete the FAFSA
The FAFSA is not just used to determine if you will receive federal government grants. Colleges, universities, as well as states, use the data to determine need-based and merit-based aid given by institutions.
Additionally, Stafford loans which every student is entitled to receive from the federal government are awarded via completing the FAFSA. These are generally the best type of student loans out there. So neglecting to complete the FAFSA is not wise.
Complete the FAFSA as soon as possible
The FAFSA is eligible to complete and submit on October 1st of each year starting the senior year of high school. This process will be repeated each year the student is attending college.
The federal deadline is June 30th. Each state also have their own deadline. But most importantly, each school has a priority deadline that you will want to know and abide by. Some schools as early as October 30th.
Some financial aid is given in a first-come-first-served manner based on limited funds. If the money runs dry, you will be out of luck.
To be safe, complete the FAFSA as soon as possible on or after October 1st.
This all seems like a complicated and scary process but just follow these steps and it’s not that bad.
Step 1: Create a Federal Student Aid (FSA) account. Both the student and one parent will need one.
Step 2: Gather the items needed to complete the FAFSA.
Step 3: Start the application and answer questions carefully. It is important to know if you get stuck you can save your work and return later with the information you are missing.
Step 4: Save and submit.
Step 5: Receive the Student Aid Report (SAR) and review it for accuracy. This document will state your federal EFC.
Step 6: Reach out to the financial aid office at any colleges of interest and see if there are additional steps or requirements needed to apply for financial aid at the school.
Step 7: Follow their additional requirements (if applicable).
Step 8: Receive award letters from interested schools. Read carefully, these are not uniform letters and unfortunately and can be confusing sometimes because each school presents the information their own way..
Step 9: Decide on a school.
There are changes coming to the FAFSA
Due to recent legislation, some changes are being made to the FAFSA rules and process. These changes will come in stages and some think provision will still be adjusted, but here are some examples of changes to be expected as of the writing of this post.
Fewer Questions
The total number of questions will decrease from over 100 to less than 40. I will reserve judgement on whether or not it will make it easier to complete. Theoretically, that is the case.
EFC will be named the Student Aid Index (SAI)
Based solely on the name, some end up thinking their Expected Family Contribution is the amount that they will end up ultimately paying for college, which is not accurate. Instead it is an indicator of financial need they are eligible to receive. Hopefully changing the name will be less confusing.
It will also be possible for some families to have a negative SAI. This should help more families who are in most need of financial assistance.
Expands the eligibility of the Pell Grant
A different eligibility formula should increase the amount of students eligible for this grant, which doesn’t have to be paid back.
Multiple child benefit is going away
This is one change that I hope will be dropped before it becomes law, especially as a parent of four children.
Currently, a student who has a sibling in college at the same time will see their EFC cut in half. So, if a college freshman has an EFC of $20,000 in year one, once their sibling who is a year younger starts the next fall, they would each would have a $10,000 EFC in year two.
With the new law, this adjustment wouldn’t be made, so each student would have an EFC of $20,000 or a total of $40,000 for the family (instead of $20,000). This would negatively affect many families.
Grandparent giving not penalized
Currently, dollars grandparents (or others) helping out with college can hurt the student’s chance of getting financial aid the following year. This will no longer be the case.
There is a lot more to know and understand but hopefully, these basics make it a bit clearer to you.
