The Student’s Guide to Financial Aid and the FAFSA
What is financial aid? What is the FAFSA? Learn about the different types of aid you can get for college and how to fill out the FAFSA.
Published on November 11, 2021 · Updated on March 4, 2022
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- A majority of students need some amount of financial aid to afford a college education.
- A variety of aid is available to students, including loans, grants, and scholarships.
- Most federal aid award amounts are calculated based on financial need.
- Many colleges use the FAFSA to determine eligibility for institutional aid.
What is financial aid? Do you have to pay back financial aid? And how can you ensure you get enough aid for college?
By filing the Free Application for Federal Student Aid, or FAFSA as it's more commonly known, new and returning students can access a variety of funding sources for college, such as grants, federal work-study, and loans.
This guide covers everything you need to know about paying for higher education, with step-by-step instructions on how to get financial aid using the FAFSA.
What Is the FAFSA and Why Is It Important?
The FAFSA is used by national, state, and local government agencies, as well as by universities and private organizations, to award both federal and nonfederal aid to students. This aid includes loans, grants, scholarships, and federal work-study.
Over the years, the cost of college has risen significantly. According to a report by the College Board, the average cost of tuition was $10,560 for in-state public universities and $37,650 for private institutions in 2020-21.
By filing the FAFSA, you can offset some of these costs and avoid graduating with hefty amounts of debt. What's more, the FAFSA comes with zero risk: You don't need to pay a fee to apply and don't have to accept any aid you're awarded if you don't want to.
What Are the 5 Types of Financial Aid for College?
College financial aid falls into three main categories: federal, state, and private. Within these categories are five types of awards students can receive.
Unlike loans, grants do not need to be repaid. These awards are typically need-based rather than merit-based and are allocated by federal and state governments. Some of the most common grants are the Pell Grant and TEACH Grant.
Similar to grants, scholarships do not need to be repaid. These monetary gifts can be need-based, merit-based, or a combination of the two.
Whereas grants tend to offer long-term (often recurring) financial support, scholarships are typically a single amount awarded in one lump sum.
Beyond the scholarships offered by colleges, some are given out by corporations, private entities or individuals, nonprofits, and professional associations and societies. Each scholarship maintains its own eligibility requirements, award amount, and application deadline.
Loans are financial awards that need to be repaid, usually with interest. Students often take advantage of both federal and private loans to help offset the cost of college.
While all loans serve the same general purpose, student loans differ from personal loans in that they must be used for education-related expenses, such as tuition and school supplies.
There are two main types of student loans:
- Federal Loans: Federal loans are provided by the U.S. government and include Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans (also known as Parent PLUS Loans). Each type of federal loan has its own fixed or variable interest rates and repayment terms.
- Private Loans: Private loans, which often require a credit check, tend to have higher interest rates than federal loans. It's best to exhaust federal loan options first since they generally offer loan forgiveness and income-based repayment plans, whereas private loans do not.
Federal work-study helps students who demonstrate financial need earn extra cash through a part-time (generally on-campus) job. Examples include working at the campus library, as a research assistant for a professor, and as a tutor.
The money a student earns from federal work-study can be used to pay for an array of educational expenses, such as tuition and fees, room and board, transportation, computers and technology, and childcare.
5. Fellowships and Assistantships
Primarily geared toward graduate and postgraduate students, fellowships and assistantships provide a stipend or salary to participants while they work and/or continue their education.
Many fellowships and assistantships are awarded to doctoral students working on their dissertations in exchange for providing research assistance and/or teaching services for the college or university.
Who Qualifies for Federal Financial Aid?
The main purpose of the FAFSA is to award federal aid to students who demonstrate financial need. To qualify for federal FAFSA money, you must meet the following requirements:
- Be a U.S. citizen, permanent resident, or eligible noncitizen
- Have a valid Social Security number
- Demonstrate financial need (requirements may vary)
- Maintain satisfactory academic progress
- Be currently enrolled in or plan to enroll in an eligible degree or certificate program
- Have a high school diploma or recognized equivalent (such as a GED diploma or homeschooling certificate)
Both undocumented students and international students are ineligible to apply for federal aid with the FAFSA. Instead, these students may apply for scholarships through their schools, their employers, and/or private organizations.
While the FAFSA doesn't have an age limit or income cap, these factors may affect your award package since aid is allocated based on financial need. But since the FAFSA is free to fill out, all students should make an effort to submit the FAFSA each year regardless of income level.
When Does the FAFSA Open? When Does It Close?
The FAFSA opens each year on October 1. Try to submit your application on this date or as soon as possible after it. Students must file the FAFSA each year they are in school in order to stay eligible for federal aid.
Each FAFSA is available for about a year and a half. For example, the current FAFSA (for aid during the 2022-23 academic year) opened October 1, 2021, and will remain available federally until June 30, 2023.
Many schools and states, however, maintain far earlier deadlines. So the sooner you get in your application, the better. If you wait too long, funds may be depleted and you may not receive any aid.
How to Apply for Financial Aid With the FAFSA: 7-Step Guide
Below, we explain how to fill out the FAFSA every year so you can get aid for college.
Step 1: Gather All Required Materials
To fill out the FAFSA, you'll need your driver's license (if you have one) and your Social Security number (or Alien Registration number if you're an eligible noncitizen).
The Office of Federal Student Aid requires financial documents such as your most recent W-2s and federal tax returns. You must also provide current bank statements; investment records for stocks, bonds, and real estate; and any information on farm or business assets.
Additionally, you may need to supply untaxed income records for things like child support, veteran noneducation benefits, and interest income.
If you're a dependent, note that your parent or guardian must submit all these materials as well.
Step 2: Create an FSA ID
Most students and their families file the FAFSA through the official online portal. After gathering all necessary materials above, you must create an FSA ID. This username and password combination allows you to provide an electronic signature, access confidential information, use the myStudentAid mobile app, and log in to your federal student aid account.
As you set up your account, be sure to input your name and Social Security number exactly as they appear on your Social Security card. An FSA ID autofills certain personal information as you complete the FAFSA, preventing common errors.
If you're a dependent, your parent or guardian will also need to create an FSA ID.
Step 3: Fill Out the FAFSA
Once you've created your FSA ID, you can begin working on the FAFSA. Most applicants complete the FAFSA in about an hour. Independent students who don't need to provide parent or guardian information may finish in even less time.
After logging in, choose the academic year for which you're filing the FAFSA. Those submitting the FAFSA for another school year may be given the option to renew their FAFSA form, saving them time by transferring over their demographic information from the previous year.
The FAFSA consists of five major sections:
- Student Demographics: This is where you provide your general background information.
- School Selection: List every college you're considering, even if you haven't applied to any of them yet.
- Dependency Status: This section determines whether you're a dependent or independent student and whether you'll need to supply any parent or guardian information.
- Parent Demographics: If you're a dependent, your parent or guardian must fill out this section.
- Financial Information: This is where you'll provide information such as tax returns and W-2 documentation.
The first four sections of the FAFSA are fairly self-explanatory and just require basic personal information — the financial information section is typically the most time-intensive.
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Step 4: Import Tax Information
When filling out your financial information in the final section of the FAFSA, you can use the IRS Data Retrieval Tool to import tax information. Afterward, you'll sign the application using the relevant FSA ID(s) and confirm your submission. Note that some students and their parents or guardians may be unable to use this tool.
When filling out the FAFSA, double-check to make sure you avoid common mistakes, like typos on personal information. You should also ensure you understand the definitions of important terms.
Even if you haven't submitted tax returns yet, you can estimate your income, submit the FAFSA, and update your records once you've filed your taxes.
Step 5: Submit the FAFSA
Once you submit the FAFSA, you can sit back and wait. It's a smart idea during this time to apply for nonfederal awards for college, such as scholarships.
You can check the status of your application at any time by logging in to your FAFSA account. Alternatively, you may call the Federal Student Aid Information Center toll-free at 1-800-433-3243.
Step 6: Get Your Student Aid Report
Students can expect to receive their Student Aid Report (SAR) about 3-5 days after submitting their FAFSA online.
This report displays basic information about your federal student aid eligibility, including the final calculation of your estimated family contribution and the Data Release Number, which your school needs to change certain information on your FAFSA.
Spend time ensuring your SAR is accurate. Your school will use this report to determine what federal and nonfederal aid you receive and may even ask you to verify certain parts of your application.
If you do find a mistake in your SAR, correct and update your FAFSA.
Step 7: Compare Financial Aid Offer Letters From Schools
You'll receive financial aid offer letters from your prospective colleges once they determine your financial need and eligibility. Timelines vary depending on the school, but typically you can expect a letter in late March or early April, as May 1 is National College Decision Day.
Note that you do not need to accept all awards in your financial aid offer letter. Prioritize free money (i.e., scholarships and grants) and any work-study awards. If you must borrow funds, pick federal loans first since these usually provide lower interest rates.
The government also maintains forgiveness programs for federal loans.
Frequently Asked Questions About Financial Aid and the FAFSA
How long does the FAFSA take to process once you file it?
Students who submit an online FAFSA can expect it to be processed within 3-5 days, while those who submit a paper FAFSA can expect it to be processed within 7-10 days. You will know your application has been successfully processed when you receive your FAFSA Student Aid Report.
Can you make corrections to the FAFSA after submitting it?
Yes, you can. To make corrections, simply log in to your FAFSA account using your FSA ID and correct or update your information as needed. Note that all changes for the 2022-23 FAFSA are due by September 10, 2023.
Make sure to also check that your financial aid information is correct before your colleges begin sending out financial aid offer letters.
Does the FAFSA cover summer classes? Trade school? Graduate school?
Any federal award money allocated through the FAFSA can be used to cover expenses for eligible trade schools and graduate programs.
You can see whether a particular school is eligible by searching for FAFSA aid with the Office of Federal Student Aid's Federal School Code Search tool. Note that all graduate students are considered independent students and thus will not be required to submit any parent or guardian information.
Whether federal aid can be used to cover summer classes depends on the institution. Reach out to your school's financial aid office to learn more about how this works.
How does student loan repayment work?
Each loan specifies its own repayment terms and timeline, such as fixed payment amounts over a period of 10 years. Students with multiple loans may consolidate them into a single Direct Consolidation Loan. This offers the convenience of making a single payment instead of several payments to multiple lenders each month.
Many federal loans offer loan forgiveness programs for qualifying graduates, including those who become teachers or work for a government agency. Some students may pursue deferment -- a temporary postponement of repayment -- for special circumstances, like unemployment or economic hardship.
DISCLAIMER: The information provided on this website does not, and is not intended to, constitute professional financial advice; instead, all information, content, and materials available on this site are for general informational purposes only. Readers of this website should contact a professional advisor before making decisions about financial issues.
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