What Is the FAFSA?
The FAFSA is the official form that families must use to apply for federal financial aid to pay for college. It is also used by many states and individual colleges and universities in making their financial aid decisions.
- The Free Application for Federal Student Aid (FAFSA) is used by the federal government to determine a family's eligibility for grants, work-study, and loans to pay for college.
- States, individual colleges and universities, and private scholarship programs also use information from the FAFSA to make their own financial aid decisions.
- Much of the information requested by the FAFSA also appears on family tax returns and can be downloaded automatically from the IRS in many cases.
What Does FAFSA Stand For?
FAFSA is an acronym for Free Application for Federal Student Aid.
How Does the FAFSA Work?
The office of Federal Student Aid, part of the U.S. Department of Education, annually provides more than $120 billion in federal aid to some 13 million students. That aid consists of grants, work-study, and loans.
- Grants, sometimes referred to as scholarships, are meant for students with "exceptional financial need" and don't have to be repaid. Today's most common federal grants for education are known as Pell Grants.
- Work-study programs provide paid part-time jobs for undergraduate and graduate students through participating colleges and universities.
- Loans, unlike grants or scholarships, must eventually be repaid. However, federal loans tend to have low interest rates compared with those available from private lenders, as well as more favorable repayment terms. There are several types of federal loans for higher education, sometimes referred to as Stafford Loans. Direct subsidized loans have the best terms and are available only to families with financial need. Direct unsubsidized loans are available to families regardless of financial need. Direct PLUS loans, are available to parents and graduate or professional students, regardless of financial need, although borrowers must have an acceptable credit history.
The FAFSA, which is administered by the office of Federal Student Aid, is the doorway to all of these types of aid.
The questions on the FAFSA are intended to determine the student’s level of financial need and establish their Expected Family Contribution (EFC). That's the amount of money the student and parents are expected to be able to pay out of pocket each year for the student’s college costs, under federal rules. The federal government, state assistance programs, the colleges the student is applying to, and other scholarship sources all use that data to determine how much aid—and what kinds of aid—the family is eligible for.
Around the time that students are accepted by a college, they will also receive a financial aid offer, which may consist of a package of grants, work-study, and loans. These offers can differ from college to college.
How to Fill Out the FAFSA
The FAFSA asks a long list of questions and takes some work to fill out, especially the first time. (Families need to complete a new FAFSA every year in order to maintain their financial aid or to try again they didn't get any aid the first time they applied.)
The FAFSA’s questions range from basic identifying information for the student and their parents (name, address, Social Security number, date of birth, etc.) to a detailed examination of their finances.
Students and parents will need to supply information on their income and assets, including bank accounts, investments, real estate (except for the family home), and any businesses they own (excluding family farms and small businesses). Both parents and students have a FAFSA account and each must complete FAFSA.
Much of this information will be available from the family's tax returns. The IRS Data Retrieval Tool (IRS DRT) makes it possible to download that data directly to the FAFSA in many cases.
To answer the other financial questions, it will be helpful to have bank, brokerage, and mutual fund statements handy. For a preview of the FAFSA's questions, the office of Federal Student Aid makes a copy of the printed FAFSA form available online. (Note that while it's permissable to fill out and submit a paper FAFSA form, the online version can be faster and more efficient unless you don't have access to a computer or the Internet.)
When Is the FAFSA Due?
Each year's FAFSA becomes available starting on October 1 and must be submitted by the following June 30 for the upcoming school year. Filling it out as early as possible is a good idea because many states have financial aid deadlines considerably earlier than June 30, and their aid may be available only on a first-come, first-served basis. The FAFSA lists some of those deadlines, and the office of Federal Student Aid publishes a more comprehensive list of state student aid deadlines.
Although families have until June 30 to submit their FAFSA, it's best to file it as soon as possible. Many states have earlier deadlines for making their financial aid decisions, and they can also run out of money.
The FAFSA vs. the CSS Profile
While the FAFSA is the best known and most widely used financial aid application form, it is not the only one. Another is the CSS Profile, an online application administered by the College Board and used by several hundred colleges, universities, and private scholarship programs to determine the student's eligibility for need-based, non-federal financial aid. Unlike the FAFSA, signing up for the CSS Profile isn’t free. Families pay $25 for the first school their student applies to, then $16 for each additional school, although the fees are waived for some low-income families.
The CSS Profile asks many questions similar to those on the FAFSA, but also delves into some other financial areas. For example, the CSS Profile takes equity in the family home into account, while the FAFSA does not. The CSS Profile also wants to know about any balances in retirement plans, while the FAFSA ignores them.
Some colleges and universities require families to fill out both the FAFSA and the CSS Profile. A number of schools also have their own, individualized scholarship applications—one more reason to get started as early as possible.