How the FAFSA Application Helps Cut College Costs

If you’re a student or a parent with your sights set on college, you’ve likely heard of the FAFSA application. For many families, filling out the FAFSA is a huge part of saving money on college tuition through accessing need-based financial aid.

How so? There are billions of dollars of financial aid available each year from many institutions including the federal government, states and colleges, in the form of loans, grants, work-study programs, and scholarships. These entities require applicants to submit the FAFSA so they can distribute financial assistance based on how much families earn.

Need-based financial aid is one way to reduce the cost of college, alongside various types of scholarships. You should look into all of these avenues of possibility, but this article will focus on the FAFSA, which is one of the most centrally important pieces of any financial aid application.

What is the FAFSA?

The FAFSA stands for the Free Application for Federal Student Aid. In order to apply for financial aid, students often have to submit a FAFSA application.

To fill out the FAFSA, students use their families’ tax information from the previous year. So, seniors applying to college in the fall of 2017-2018 will use tax information from 2016.

Students receive federal aid through participating colleges, which means that financial assistance varies by the availability at colleges.

How to Receive Federal Aid via the FAFSA

The federal government requires that applicants submit the FAFSA to help colleges determine who gets how much financial assistance.

The financial information provided on the FAFSA makes up an applicant’s Expected Family Contribution (EFC), which is subtracted from the cost of college attendance (COA) to determine financial need.

That might sound complicated, but it’s not. Here’s the formula for federal financial assistance:

COA (Cost of college attendance) – EFC (Expected Family Contribution) = Amount of need that can be provided by the U.S. Department of Education

Families are notified of their Expected Family Contribution after submitting the FAFSA. The U.S. Department of Education provides this information in the Student Aid Report (SAR), delivered two weeks after submitting the FAFSA.

That doesn’t mean you can’t get a head start. To get a sense of how much financial aid you’ll receive before viewing your Student Aid Report, you can approximate Expected Family Contribution with the Quick EFC Calculator.

What Types of Financial Aid are Provided by the Federal Government?

Colleges provide families with financial assistance system through the following federal programs:

  • Federal Pell Grants
    • Pell Grants are financial awards that you usually don’t have to pay back. Families receive Pell Grants through participating colleges, from the federal government.
  • Direct Subsidized Loans and Indirect Subsidized Loans
    • Also referred to as Stafford Loans, Direct and Indirect Subsidized Loans are loans made by the federal government, the amounts of which are determined by the college. The difference between Direct and Indirect Subsidized Loans is that Direct Subsidized Loans have better terms to help with financial need. Unlike grants, loans must be paid back over time with interest.
  • Federal Supplemental Educational Opportunity Grants (FSEOG)
    • These grants are provided by the federal government to students with the most financial need. Similarly to Pell Grants, the amount received through FSEOGs depends on participating colleges.
  • Federal Perkins Loans
    • Perkins Loans are low-interest loans for which participating colleges act as lenders. The amount you may receive depends on the college.
  • Federal Work-Study
    • Federal Work-Study provides college students with part time jobs to help offset the cost of college. Similarly to Loans and Grants, Work-Study is administered through participating colleges.

How Do I Apply for Federal Student Aid?

We just listed a variety of different ways students can receive money from the federal government through colleges. Here’s the thing: you do not necessarily have to choose which program is best for you right off the bat.

Since these federal financial aid programs are administered through participating colleges, colleges will inform you of your financial aid options themselves. You’ll be notified of your options alongside your acceptance letter in the spring.

The Timeline for Applying For and Receiving Financial Aid

Fall of Senior Year

Prior to October 1st: Narrow Down Where You’re Applying

  • Part of the FAFSA application is indicating which colleges you will apply to. This way, colleges will be able to provide federally-funded grants, loans, and work-study programs. You don’t have to have the complete list done by the time you submit the FAFSA, but you do have to indicate at least one college you’ll be applying to.

October 1st: Submit FAFSA

  • First things first: choose where you are applying to college. Part of the FAFSA application is indicating which colleges you will apply to. This way, colleges will be able to provide federally-funded grants, loans, and work-study programs.

Here’s what students need to complete the FAFSA application:

  • Social security number
  • Alien Registration number (if not a US citizen)
  • For dependent students: their parents’ tax information, which includes:
    • Previous year’s federal income tax returns
    • W-2s
    • Other records of money earned
    • Bank statements and records of investments (if applicable)
    • Records of untaxed income (if applicable)
  • For independent students: their own tax information
  • An FSA ID to sign electronically (you can create this online)

Two Weeks Later: Receive Student Aid Report.

  • Here’s an example of the SAR. The SAR confirms that your FAFSA is complete, and states your eligibility for financial aid.

November 1 – 15: Deadline to Submit Early Action and Early Decision Applications to Colleges.

  • Learn how you can apply early and still secure financial aid [link to section below]

Winter of Senior Year

January 1: Deadline to Submit Regular Decision Applications to Colleges.

Spring of Senior Year

March – May: Receive Admissions Decisions from Colleges you Applied to Regular Decision.

  • Even though you’ll hear back from colleges to which you’ve applied Early Action and Early Decision by mid-December, you often won’t receive your financial aid options from those colleges until this time.

When Should You Submit the FAFSA?

The deadline to submit the FAFSA varies by state and college. Check your state’s deadline here. All deadlines fall after January 1st of senior year.

Many colleges will recommend that you submit the FAFSA on or as close to October 1st as possible. There are two major benefits to submitting the FAFSA early:

  • You are more likely to receive your fully expected amount of financial aid.
  • You will receive useful information about your financial options (through the Expected Family Contribution) before applications are due. This can be helpful if financial aid is an important factor when deciding where to apply to college.

How Do I Apply Early and Secure Financial Aid?

Students who apply Early Action or Early Decision must submit their applications by November 1st, and often receive letters of acceptance in mid-December. This timeline can be problematic for families who want to apply for financial aid.

Even though colleges deliver an admissions decision in mid-December, many colleges still don’t provide a financial aid package until the spring. So families sometimes do not know how much financial aid they’ll receive until some time around April, as regular admission decisions come back.

If the financial aid package plays a major role in your decision-making process, applying Early Action still leaves time to compare aid options before decisions are due around May 1st.

However, students who want to apply Early Decision might not know their financial aid package until months after they’ve committed to a school.

(Remember that Early Decision, unlike Early Action, is a binding contract. If you apply to a college Early Decision and get accepted, you have to go. The only condition in which students can opt out of an Early Decision contract is when the financial aid package is not sufficient.)

If financial aid is a significant factor and you want to apply Early Decision, you might be taking a bit of a gamble. However, there are two things you can do if you’re applying Early Decision to understand the most you can about expected financial aid:

  • Submit the FAFSA close to October 1st and save the Student Aid Report delivered shortly thereafter. It’s a summary of the data you submitted and can give you helpful information about your Expected Family Contribution.
  • Discuss your requirements for financial aid with the admissions office from the school you’re applying to Early Decision. They can help you determine your expected cost of attending a given college.

What Should I Do While I Wait?

You’ve visited schools, submitted the FAFSA, completed your college applications, and now you’re crossing your fingers and waiting to hear back. Go ahead and take a breather, but remember that your future isn’t totally out of your hands at this point. This article has focused on need-based financial aid provided through the federal government as well as public and private universities, but there is also a whole world full of scholarships available to you. You can apply for many of these scholarships while you wait to find out where you are accepted to school. This will you keep you busy, but it isn’t busy work; along with a good financial aid package, even a couple of small scholarships can make the difference in affording your school of choice!

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By |2018-07-16T13:53:49+00:00November 1st, 2016|Admissions|

About the Author:

Danny is a member of Testive's Parent Success Team.