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It’s hard to believe but your student will be graduating from high school next spring. You have been planning for this next chapter in their lives for years by saving for their future education with a 529 plan. This past summer, the family vacation included college campus visits. You and your child researched where are the best post-secondary educational and training institutions for their chosen career path. Now that October is here, you know it’s time to take the next step for your child’s college education. It’s time to fill out the Free Application for Federal Student Aid (FAFSA).
What Is FAFSA
FAFSA is the federal application used to apply for need-based federal financial aid to attend four-year colleges and universities, community colleges, vocational schools, and graduate schools. Federal student aid is available in a variety of forms. Need-based federal financial aid is typically offered in the form of grants, loans or work-study. Before you accept any aid, make sure you understand the financial commitments that come with them. A Pell Grant will not have to be repaid. Federally subsidized student loans and parental loans must be repaid with interest. Work-study programs allow enrolled students to work part-time to earn money for college costs.
It’s best to submit your completed FAFSA application as soon as possible, as the financial aid is offered on first-come, first-serve basis. So the earlier the submission, the better the chances are to receive federal monetary assistance. Remember, your CollegeAdvantage 529 account can be used in conjunction with financial aid and scholarships.
Other organizations — like states, universities, colleges, and private organizations —also use the FAFSA to determine what institutional grants or loans to offer students interested in attending their school. Therefore, it is in your family’s best interest to apply for FAFSA to receive need-based federal financial aid as that information is also used to additional avenues for student aid.
October Start Date
In 2015, the federal government simplified the FAFSA process. You can now begin the financial aid application procedure in October, which is three months earlier than previously allowed. Originally, the earliest the FAFSA form could be submitted was the first day in January of the year in which your student started or continued their college education. This start date was moved to October so it would better align the financial aid application process with the college application process. College-bound students and their families can now find out how much need-based federal financial aid they may receive about the same time they receive college acceptances. Armed with this information, you and your child can better determine what schools will offer the best financial fit. By knowing how much federal monetary assistance you may receive, you can best estimate your child’s college costs and so manage the accrued savings in your 529 account.
Since states, universities, colleges, and private organizations also use FAFSA to determine what grants or loans to offer, you and your student may also learn earlier if there will be any additional financial assistance available.
Prior-Prior Year Tax Return
Additionally, the federal government now allows FAFSA to be filled out with the income tax return from two years prior, known as “prior-prior year.” Previously, the federal financial aid application was filled out with the previous year’s tax return information. For example, if your child filed a FAFSA for the 2016-2017 school year, it would have contained your 2015 tax return information. Due to when they received their W-2s, most families filed their tax returns after the January FAFSA start date. This slowed down the financial assistance process. As federal financial aid is given out in a first-come, first-served method, submitting the FAFSA form later because of delayed tax return filings could reduce the chance to receive federal financial aid. Now, with the use of the “prior-prior year” tax return, you can more readily fill in the FAFSA starting in October, and therefore, potentially increase the chance to receive financial assistance.
Universities and colleges also benefit from the use of the “prior-prior year” tax return on FAFSA because it can reduce the amount of time needed to verify asset information since the IRS already has it. The schools can more readily determine and then quickly distribute their financial aid to students.
IRS Data Retrieval Tool
With the use of “prior-prior year” tax return, you can now take advantage of the IRS Data Retrieval Tool (DRT). DRT electronically imports your accurate IRS information to the FAFSA form. This can reduce the amount of errors entered on the application as well as reduce the time needed to complete the form. DRT will also help colleges and universities to speed up their approval process as there will be less need to authenticate the financial information.
For a great step-by-step guide on how to file the FAFSA, visit here. Or you can read this parents-focused guide from the U.S. Department of Education on how to come along side your child as they fill out FAFSA. There is also a checklist of documents to have readily available before you and your child begin to fill in federal financial aid application. If you would like to estimate of how much financial aid you might receive before doing the FAFSA paperwork, fill in the necessary information to this calculator.
You should always fill out the FAFSA, even if you don’t think your child will qualify for any need-based financial aid. You never know for what financial assistance your child might qualify to use with your CollegeAdvantage account. Post-secondary educational institutions and private organizations also use the information on FAFSA to determine how to apply their financial aid and scholarships. FAFSA is also used to determine for what federal loans your family may qualify. So collect your paperwork fill out the FAFSA.
Posted on October 4, 2017