Photo by Andrew Neel on Unsplash
Students applying for college financial aid may complete the Free Application for Federal Student Aid for the 2023-2024 school year as soon as October 1, 2022. If you are already on it good for you. Completing the FAFSA early isn’t a requirement, but it can help you qualify for more aid and will give you an indication of how much aid you could be eligible for in the future.
Below are five tips to help you complete the FAFSA form for your student.
1. Obtain your FSA ID first. If you are new to the process, you will need an FSA ID (Federal Student Aid identification number) for both you, the parent, as well as the student. Parents and students who have completed the FAFSA in the past may use their existing FSA ID number.
For more information on creating and using the FSA ID, click here.
2. Make changes to your financial situation prior to completing the FAFSA form. The FAFSA will use your 2021 tax information, and the current value of your financial assets. “Current” is technically defined as the value of your asset as of the day you complete the FAFSA form.
For purposes of determining your Expected Family Contribution (EFC) - also now known as the Student Aid Index or SAI, the FAFSA assesses student assets at 20%. Parent assets are assessed at rate of 5.6%. Some assets like IRAs and other retirement accounts are exempt from the financial aid calculation.
Since the FAFSA looks at current values of eligible assets, parents may shift assets any time prior to completing the FAFSA form, possibly lowering your Student Aid Index when you submit the FAFSA.
Repositioning assets prior to completing the FAFSA may result in an increased financial aid award, but be careful. Just because you lower your SAI doesn’t guarantee that you will get more financial aid for college. Your actual award will depend on your income (probably the biggest factor) and the cost of attendance at the school your student attends, in addition to any financial assets you may have.
3. Pay off debts now. If you have expenses, debts or other bills you need to pay anyway, pay them off before your complete your FAFSA form. For example, if you owe $10,000 on a credit card and have the money on hand to pay it off now, do so before completing the FAFSA.
This way, you reduce the value of your assets prior to completing the FAFSA form and will decrease your SAI accordingly.
4. Max out your IRA if you haven’t already. Another idea: contribute to your 2022 IRA or Roth IRA right now, if you haven’t maxed it out for the year.
IRAs are exempt assets on the FAFSA form. Contributing to the prior to completing the FAFSA form reduces the amount of eligible assets you must claim when completing the form.
The IRS allows people with earned income (from a job) to contribute up to $6,000 per year to an IRA. People aged 50 and older may contribute $7,000.
Rules regarding IRAs can be tricky. For more information IRA contributions, click here. Or just talk to your financial advisor.
5. Complete the FAFSA even if you don’t think you will get any financial aid. This one is huge and many parents miss it.
Here’s why it’s so important: Completing the FAFSA form is a basic prerequisite to receiving any type of financial aid or other benefits. Federal student loans, work-study, and merit-based financial aid awards all require the FAFSA to be submitted. Many other scholarships administered through the school will also require you to have completed the FAFSA form.
Even though many of these awards are not based on financial need, they still require you to submit the FAFSA to be eligible to apply. Unfortunately, that’s just how the game is played. Failure to complete and submit the FAFSA form could disqualify you from student loans, merit scholarships and other aid.
Bonus Tip -- DO NOT MISS THE JUNE 30 DEADLINE. For best results… submit the FAFSA early. Some financial aid awards are first-come, first-served and money can run out. However, the big mistake to avoid is missing the June 30, 2023 deadline to complete the 2023/2024 FAFSA altogether.
It happens. Your busy. You have 9 months to complete the forms. Maybe you need to do some college planning before submitting the FAFSA. Yada, Yada, Yada... Next thing you know its mid-July 2023, you get your tuition bill for fall semester and realize that all your financial aid awards expired without being claimed.
Missing this deadline by as little as one day means you could lose all the financial aid you would have been entitled to. It's a gut punch you don’t want to experience.
Complete and submit the FAFSA now.
To discuss any of the topics in this blog or to learn more about how we can help you Cross The Bridge To A Confident Retirement, please contact me through my web site mikebranch.net, call me directly at 651-379-3935 or email me at mpbranch@focusfinancial.com.