Completing the FAFSA

February 3, 2016 Scott Sanders
FacebookTwitterLinkedIn

Paying for college has become a huge burden for many families. For most families with children that go to college, paying for college is their largest expenditure next to buying a house. College graduates earn more and have a lower unemployment rate on average than those without a college degree. But college has become very expensive. The average cost of attendance for one year at an in-state four-year public college is about $20,000-$25,000. Private colleges and out-of-state public colleges can cost much more. The cost for sending one child to school for four years can be $100,000 or more. Most students don’t graduate in four years so the cost is even higher. And what if a family has two or three or more children that will go to college? The cost could go well into six figures. These amounts are scary for parents who are trying to provide for their families. They don’t want to burden their children with student loans, but want to be able to retire in a few years. What can be done to reduce the cost?

Thankfully, most families don’t pay the full cost of attendance. Financial aid may offset part of the cost. Types of financial aid are grants and scholarships, work-study, and student loans. A key part of applying for financial aid is filing out the FAFSA (Free Application for Federal Student Aid). It must be filled out to apply for all federal financial aid. It is also used by most colleges to give out their institutional funds. It is completed online at www.fafsa.ed.gov. You need to file FAFSA by the earliest priority financial aid deadline of the schools that you are considering. Don’t delay filing your income tax returns and FAFSA form! It could cost you thousands of dollars.

Action Plan for Completing the FAFSA:

  1. Know your deadlines and put together a plan – You need to look on the website of each college that you are considering and find out the priority financial aid deadline of all the schools that you are considering. The FAFSA needs to be submitted before the earliest of these deadlines. Some states give out their state aid on a first-come, first-served basis. Click here to see the state deadlines.
  2. Prepare income tax returns – This is the first step that is necessary in order to complete the FAFSA. Many people may have always procrastinated filing these returns until around April 15. That is not a good idea when filing for financial aid. Many of the priority financial aid deadlines are before April 15. Most people have the information that they need to file the returns by February 1. Most of the W-2s, 1099s, and other tax forms should have been received by then. They may need to compile their deductions, but information should be available. If it is not possible to complete the income tax returns before the FAFSA must be filed, then you can file the FAFSA using estimated amounts. You will have to go back into the FAFSA and correct it when the tax return is completed.
  3. Apply for the FSA ID – Both the student and one custodial parent must have a FSA ID to fill out the FAFSA. It will take 1-3 days to get it approved, so go ahead and get it so you will be ready to complete the FAFSA.
  4. Gather income information – The FAFSA asks for information about the assets of the parent(s) and student on the day the FAFSA is filed. Get this information together so that you will be ready to complete the form.
  5. Complete the FAFSA – Set aside about an hour to complete the form. There are questions about the demographic questions about the student and the parent(s) as well as a section to list the schools that you want the FAFSA sent to. If you have filled your tax return at least three weeks earlier, you should be able to use the IRS Data Retrieval Tool to import the income data from your tax returns. Using the Tool will help insure the accuracy of the form. You will also fill out the asset information. Read the instructions carefully in order to know what is reported and what is not, in order to properly fill out the form.

This post is meant only to give general information about the FAFSA process. The financial aid process is very complex and each family’s situation is different and each college is different. You need to check with each college that you are considering in order to know its rules and deadlines. I will speak about other aspects of the financial aid process in future posts.

Please contact me at scott@sandersaccountingfirm.com if you need income tax preparation or assistance with completing the FAFSA or have any questions about the process. We also offer tax and financial aid planning and consulting services.