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As your family is now working through the logistics of this school year, you also need to keep your eye down the road to the next school year, especially if your child is getting ready to head off to whatever school comes after high school. As of Oct. 1, you can fill out the Free Application for Federal Student Aid (FAFSA). If your child is graduating from high school next spring or will be continuing their high education in 2021-2022, you should submit this form as quickly as possible.
What is FAFSA?
FAFSA is the application used to apply for federal financial aid to attend federally accredited four-year colleges and universities, two-year community colleges, vocational schools, U.S. Labor Department approved apprenticeship programs, and graduate schools.
You can use your 529 plan at any higher education institution nationwide that receives federal financial aid. The quickest way to confirm that the school to which your child may want attend in the USA does accept this government aid is to see if it has a Federal School Code on FAFSA. If it does, you can use your 529 plan there.
Federal student aid is available in different forms. Need-based federal financial aid typically is offered in as grants, scholarships, subsidized loans, or work-study. Before you accept any aid, make sure you understand the financial commitments that come with each of them. A Pell Grant does 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. Work-study programs opportunities may be limited due to current COVID safety protocols.
It’s best to submit your completed FAFSA application as soon as possible, as the financial aid is offered on first come, first served basis. So the earlier the submission, the better the chances your child will receive federal monetary assistance. The later you turn in the application, the more likely the available pool of financial aid will be smaller, which can affect how much funding your child may receive.
Other organizations—like states, universities, colleges, and other organizations—use the FAFSA to determine what institutional grants or loans to offer students interested in attending a school. Therefore, it is in your family’s best interest to apply for FAFSA to receive federal financial aid as that information is also used to additional avenues for student aid.
For a step-by-step guide on how to file the FAFSA, read this article from NerdWallet or this one from CNBC. You can also read this parent-focused guide from the U.S. Department of Education on how to assist your child as they fill out FAFSA. There is also a checklist of information documents to have readily available before you and your child begin to fill in the federal financial aid application.
October start date
In recent years, the federal government simplified the FAFSA process by moving the start of the financial aid application process to October. Previously, the earliest the FAFSA form could be submitted was the first day in January of the year in which your student would start or continue their higher education.
The new start date aligns the financial aid application process with that of college applications. Now college-bound students and their families can find out how much federal financial aid they may receive around the same time acceptance letters start to arrive. Armed with this information, you and your child can better determine what schools may offer the best financial fit. By knowing how much federal monetary assistance you may receive, you can best estimate your child’s qualified higher education expenses and so manage your accrued savings in your 529 account.
If you would like an estimate of what you can expect to receive in financial aid, after filling out FAFSA, use the same information to complete the FAFSA Forecaster tool.
Since states, universities, colleges, and other private organizations use FAFSA to determine what grants, scholarships, or loans to offer, your family may also learn earlier if there will be any additional financial assistance available.
Prior-Prior Year Tax Return
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. This meant many families filed their tax returns months after the January FAFSA start date, based on when they would received W-2s and other tax documents. 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 potentially reduce the amount of 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 amount of 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 with the IRS. The schools can more readily determine and then quickly distribute their financial aid award letters 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 supplied financial information.
Always fill out FAFSA
You should always fill out the FAFSA, even if you don’t think your child will qualify for any financial aid. You never know for what financial assistance your child might qualify to use in conjunction with your Ohio 529 Plan.
Higher education institutions and other 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 child may qualify. So collect your paperwork and fill out the FAFSA! Remember, your CollegeAdvantage 529 accounts are made to be used in conjunction with financial aid as well as scholarships.
Visit Ohio’s 529 Plan online to start saving today for your child’s future education. An investment in a 529 plan is an investment in your child where every dollar saved today is a dollar that doesn’t have to be borrowed later. A 529 account can be used for whatever comes after high school. If you’d like to do more research, explore Ohio’s 529 Plan — The Plan That Can.
Posted on October 5, 2020