Students who plan to attend or continue college next fall should get ready to start the application for financial aid.
The new Free Application for Federal Student Aid, known as the Fafsa, became available online on Jan. 1. The form is the starting point for students and families seeking federal aid, and is used by most states and colleges as part of the student aid process. The form collects financial and personal information about students, and their parents if they are dependents, to determine eligibility for scholarships, grants, work-study awards and loans. It must be completed every school year for students seeking aid.
Filing the Fafsa as soon as possible increases applicants' chances of getting the best financial aid packages for which they are eligible. Those who file the form from January through March receive, on average, twice the amount of grant money as those who file later, said Mark Kantrowitz, publisher of the financial aid website Edvisors.com.
That probably is because many states and colleges have early deadlines. Connecticut, for example, has a Feb. 15 deadline for certain aid programs. (In Minnesota, the deadline is 30 days after the term starts.) Plus, some state grant programs distribute awards on a first-come, first-served basis. So waiting means that students may miss out on aid even if they qualify. (Edvisors offers a guide to filling out the Fafsa, available as a free download.)
Though print versions of the Fafsa are accepted, most applicants submit it online. That allows many to use the Internal Revenue Service's Data Retrieval Tool, which can transfer important financial information directly from tax records into the Fafsa. But there's a catch: The tool typically doesn't become available until early February and can only be used by those who have already filed tax returns. Many people don't have the necessary information available to file their taxes until later in January, so the tool's usefulness is limited.
The timing problem could easily be addressed, said Lauren Asher, president of the Institute for College Access and Success, a nonprofit group. The group supports letting Fafsa applicants use financial information from the previous year's tax returns, rather than the return for the calendar year just ended. That, the group says, would simplify the process, and better align the Fafsa cycle with the college application cycle. The institute, and more than three dozen other education and consumer groups, recently sent a letter asking the Obama administration to do just that. "It's a no-brainer," Asher said.
A common mistake applicants make on the Fafsa is to include the value of their or their parents' retirement plans, or the value of their family's primary home, said Martha Holler, a spokeswoman for the student lending giant Sallie Mae. Neither is used by the Fafsa to calculate financial need, so including them could hurt an applicant's chances. "This is not a time to overstate the value of your assets and investments," Holler said.
She also advised applicants to pay attention to the confirmation page that appears after submission of the Fafsa online. It may contain helpful information that won't necessarily be in a separate, e-mailed confirmation, she said.
Here are some questions and answers about the form:
Q: What if I don't have income tax information ready in January?
A: That's a common problem, because many people don't receive the necessary forms, like W-2s, to file their tax returns until late January, or even February. You can wait, or you can complete the Fafsa using estimated information, say, from the last 2014 pay stub, or even the 2013 tax return. Then, after you file a return for the 2014 tax year, file updates to Fafsa. (The online form lets students check a box to receive a reminder by e-mail, Holler noted.)
Q: Do I need a special PIN to apply for student aid?
A: You will need a PIN to sign your Fafsa. You can apply for one in advance through the Federal Student Aid office, or you'll be prompted to do so when you fill out the Fafsa. (Starting in late April, according to the student aid office, applicants will be asked to choose a user name and password, instead of using a PIN.)
Q: Is the Fafsa the only financial aid form I need to file?
A: Some states may require additional information, and some selective private colleges and universities require applicants to submit a CSS/Financial Aid Profile, which may ask for more financial details for nonfederal aid. You can find information about this application on the College Board's website.