FAFSA Checklist: 10 Things to Remember
If you have a son or daughter who is a high school junior or senior, chances are you have been guiding them through quite a bit of paperwork lately. From college applications and scholarship essays to requests for transcripts and recommendation letters, it seems that there is a never-ending stream of forms to be completed in the college application process.
In the midst of all this paperwork, don’t forget to file one very important form, the FAFSA. The FAFSA stands for Free Application for Federal Student Aid. It is used to calculate a family’s Expected Family Contribution (EFC) which measures their relative financial strength. Importantly the EFC plays a large part in determining financial aid eligibility. Keep in mind that even though the EFC is used in determining financial aid, it doesn’t mean this is the amount the family will have to pay. Rather the EFC helps each college evaluate what student aid and loans might be available to your student.
For new freshman heading off to college next fall, the FAFSA becomes available for filing October 1st of their senior year in high school. Taking time to complete this form now can help your student have priority for any financial aid available.
As a former college financial aid advisor, I have guided many students and parents through the FAFSA application process. The ten tips below, from my experience in the field, can help you in filling out the FAFSA.
FAFSA Checklist: 10 Things to Remember
#1. File early!
File the FAFSA early to ensure maximum consideration for financial aid. Many states have specific deadlines to be considered for state awards. To find your state’s deadline, visit the FAFSA website and select your state. Each college or university may also have their own priority deadline. Make sure to check with the financial aid office at the schools your student is considering.
#2. Use a worksheet.
The FAFSA asks questions about your family’s income, net worth, and household size. Use a worksheet from the FAFSA website to help you gather the necessary information before filing online.
#3. Create an FSA ID.
To electronically sign the FAFSA, students and parents both need to apply for a Federal Student Aid ID. The FSA ID is a username and password that allows you to electronically sign the FAFSA, and other federal financial aid documents. Parents with more than one child attending college use the same FSA ID to sign each FAFSA. Each student must have their own individual FSA ID.
#4. Let the IRS do the work for you.
Many FAFSA questions refer to specific items on the federal tax return. The FAFSA IRS Data Retrieval Tool (IRS DRT) allows you to transfer your tax information directly from the IRS to the FAFSA form.
Extra Reminder: The FAFSA uses tax return information from two years prior. For example, the 2020-2021 FAFSA, that became available October 1, 2019, requires information from your 2018 tax return.
#5. List the correct parent.
Are parents separated or divorced? Report information for the parent whom the student lived with most in the past 12 months. If the student lived with each parent equally, report information for the parent who provided the most financial support during the past 12 months.
#6. Having financial difficulty? Let your school know.
If your family has encountered financial difficulties, such as high medical bills or job loss, notify the financial aid office at your school. While it can be tough to talk about difficult financial circumstances, financial aid offices want to help your student receive the maximum amount of aid. They may be able to make an adjustment and increase financial aid eligibility.
#7. Report your assets and investments correctly.
Only certain assets must be reported on the FASFSA. Make sure not to overstate your investments. For example, the value of retirement accounts, and the net worth of the home you live in, do not need to be reported.
Investments DO include:
- Real estate (except your primary residence)
- Rental property
- Trust funds
- UGMA and UTMA accounts owned by the student (these should be listed as the student’s assets)
- Educational savings accounts (such as 529 plans and prepaid tuition plans)
- Money market funds
- Mutual funds
- Certificates of deposit
- Stock, bonds, and other securities
Investments DO NOT include:
- The value of your primary residence
- Life insurance
- Retirement plans such as 401[k]s, pension funds, annuities, and non-education IRAs
- UGMA and UTMA accounts for someone other than the student (for which the parents are the custodian, but not the owner)
Unlike tax return information, which is reported from two years prior, asset value is reported as of the day you complete the FAFSA. Detailed information on what investments to include is also available on the FAFSA website.
#8. Don’t forget 529s and other college savings plans.
Report the value of any college savings accounts (i.e. Coverdell savings accounts, 529 plans, and the refund value of prepaid 529 plans) owned by the student or the parent as parents’ assets (for dependent students). Parents must also report the value of college savings accounts owned for other members of their household. For graduate and independent students, the value of accounts owned by the student is reported as student assets on the FAFSA.
Important Note: If a 529 plan is owned by someone other than a parent, such as a grandparent, do not report the plan’s balance on the FAFSA. Instead, when distributions are made from the plan, report these as “student untaxed income” on the FAFSA. Because income is reported from two years prior, distributions made in 2019 would be reported on the 2021-2022 FAFSA.
#9. Higher income? File anyway.
While students of wealthy families may not receive need based federal financial aid in the form of grants, the FAFSA is required to apply for federal student loans. These loans have a low interest rate, may be subsidized, and payment is deferred until the student leaves school. Many schools also offer their own need-based aid for which a student may be eligible. Finally, schools often require the FAFSA as part of the application process for merit-based financial aid, such as academic scholarships.
#10. Ask for help.
If you have additional questions while completing the FAFSA, the first step is to contact your school’s financial aid office. School financial aid counselors want to assist you in the FAFSA completion process and answer your questions. You may also contact the Federal Student Aid Information Center at 800-433-3243.