August 24, 2020 By Jean Chatzky

5 Things to Do to Prepare for the FAFSA

5 Things to Do to Prepare for the FAFSA

The Free Application for Federal Student Aid, otherwise known as FAFSA, is the first stop for millions of families looking to cover the cost of a college education. For the 2020-2021 school year, 84% of parents plan to fill it out, according to a recent College Ave Student Loans survey of parents of college students conducted by Barnes & Noble College Insights.

It’s the 10-page form that everyone must complete to receive financial aid from the federal government. Some states and colleges also use the FAFSA to award state and institutional aid. It’s also the main source of funding for more than 13 million college-bound students each year.

“Financial aid can significantly reduce the cost of college,” says Erin Powers, spokesperson for the National Association of Student Financial Aid Administrators. “Applying for aid all starts with the Free Application for Federal Student Aid (FAFSA).”

With so much on the line, there’s no question that filling it out can be nerve-wracking. Make any mistakes, and it could delay your financial aid offer and you could lose thousands of dollars that would help you pay for college. The good news: Those risks can be greatly reduced by preparing for the FAFSA in advance. Here’s how:

1. GET YOUR FEDERAL STUDENT AID ID EARLY

The application period to apply for FAFSA kicks off on October 1 each year, but that doesn’t mean you have to wait until then to create a Federal Student Aid ID. The ID consists of your username and password and is used to confirm your identity when applying for federal financial aid digitally. Having this ID is the fastest way to process your application, Powers says. It’s also the only way to access or correct your information online. Since many student loan applications are required to provide parent information on their FAFSA, Mark Kantrowitz, Publisher and VP of Research at Savingforcollege.com, recommends that both parent and child have their own FSA IDs. “When parents create an FSA ID for their child, there are often errors made,” says Kantrowitz. “If the student and parent have their own FSA ID, they are much less likely to have errors.”

 2. AVOID COMMON MISTAKES

The last thing you want to do is fill out the FAFSA incorrectly. That could delay your application and potentially impact the amount of money you’re eligible for. To prevent any costly mistakes, learn from those before you by researching common snafus. The internet is a treasure trove of information, but to make it easier, the National Association of Student Financial Aid Administrators has a running list of the doozies.

They include:

  • leaving blank fields on the application
  • using commas or decimal points in numeric fields
  • providing an incorrect social security number or driver’s license number
  • entering the wrong information about taxes and adjusted gross income (AGI)
  • failing to register with the Selective Service for males between the ages of 18 and 26

Any or all of these mistakes could hurt your ability to get federal financial aid. Arming yourself with the knowledge of what could go wrong when filling out FAFSA can go a long way in preventing anything untold from happening during the process.

3. PREP YOUR FINANCES TO MAXIMIZE YOUR AID

The more your family earns, the less need-based aid you’re eligible for from the federal government. That’s why it’s important to avoid any moves that could inaccurately report your income before filling out the application. FAFSA bases income on the prior year, so if you’re applying for aid for the 2020-2021 academic year, you’ll have to offer up income from 2019. “You don’t want to artificially inflate your income, then you will get less aid,” says Kantrowitz. That means avoid selling stocks for gains, exercising stock options, or drawing down distributions from a retirement plan during the period the income will be included. “If you owe credit card debt and have cash in the bank use it to pay down credit card debt and make that money disappear,” he says.

Also, be sure to look at any financial aid offers with a realistic eye. Not everything you see on paper offers an accurate accounting of how much you’ll spend on your child’s education. According to the College Ave Student Loans and Barnes & Noble College Insights survey, 62% of parents said their child received a financial aid award letter last year. Of those, nearly half said they ended up spending either a little or a lot more than what they were expecting, based on what the letter specified. Nearly half — 43% — estimate they will spend between $1,000 and $5,000 more per year than was specified.

If you’re considering loans to help out with college costs, and are interested in exploring your options for how private student loans can help fill any gaps you might have, it’s important to shop around for the best deals. College Ave Student Loans offers students the ability to search for things like flexible repayment plans and the most competitive rates.

4. GET YOUR DOCUMENTS AND DEADLINES IN ORDER

Filling out the FAFSA has gotten easier in recent years, thanks to a mobile app and the ability to import tax data directly from the Internal Revenue Service via the IRS Data Retrieval Tool (IRS DRT). That removes the need to manually provide your income and tax information, preventing some big mistakes from happening. But there are other documents you should have at the ready. A few things you’ll need while preparing to fill out the FAFSA include:

  • your Social Security number
  • W-2 forms from two prior years
  • a record of untaxed income for two years prior
  • documentation of any grants, scholarships, or income from work-study programs

It’s also important to know the deadline for getting your FAFSA application completed.  “Many states and colleges set priority deadlines by which you must submit the FAFSA form to be considered for the aid programs they administer,” said Powers of the National Association of Student Financial Aid Administrators. Take note of the FAFSA deadlines for your area.

5. DON’T PAY FOR HELP

The FAFSA is a free application, and while it may seem daunting before filling it out, it’s been made much easier over the years. That hasn’t stopped companies from hawking pay-for services to assist you in getting the application completed. Although tantalizing, Kantrowitz says it’s ultimately a waste of money and something everyone should avoid doing. “Do not pay anybody to complete FAFSA. It’s very easy to do,” he says, noting the person you’re paying to fill it out still needs you to provide all the information required. “It won’t save you any time.”

Experts say you should reach out to the financial aid administrator at your prospective college if there has been a recent change in the family’s income, say high medical bills due to an unexpected illness or injury, or a job loss or income change. Due to the impact of the Covid-19 pandemic, 1 in 5 families had or planned to reach out to their child’s financial office to ask for additional aid ahead of the 2019-2020 school year, according to the College Ave survey conducted in June. There may be supplemental information you can provide that will increase the amount of financial aid you’re entitled to. “Anything a little out of the ordinary that affects your ability to pay for college should be appealed,” says Kantrowitz. “The sooner is generally better than later. Colleges have more money earlier in the financial aid process.”

The FAFSA Will Always Be Your First Stop

While it’s great that 84% of parents have indicated they plan to fill out the FAFSA, ideally that number would be 100%. It’s largely considered to be the “gateway” to all forms of financial aid since many scholarship applications require that you fill out the FAFSA before you’re even considered for other offers. The college application process can be fraught with other considerations and complications, but thankfully the FAFSA doesn’t have to be one of them. A little advanced prep the best place for students and parents to start to ensure smooth sailing when submission time comes.