Congratulations! Your child (spouse, or yourself) has decided to continue their education! While this is an exciting time, you may be asking two important questions: How will we pay for this? And, should we file the FAFSA (Free Application for Federal Student Aid)?
You are not alone! Many families each year work through these questions. To help you answer these questions, and maybe take away a little stress that goes with tackling this big financial commitment, we answer six common questions about FAFSA and paying for college below.
What is the FAFSA?
The Free Application for Federal Student Aid, or FAFSA, is an application that college students and their families (typically whoever supports that student financially) fill out to receive financial aid. This form is a prerequisite for federal student loans, grants, and work-study. The form becomes available on October 1st each year and it is advisable to fill it out as early in the fall as possible to ensure you meet your higher education institution’s financial aid deadlines and to maximize your chances of getting the most amount of aid possible.
Additionally, some colleges and universities may also require the FAFSA for distribution of their own institutional aid to students. Because each college and university is different, there may be supplemental forms or information required for additional financial aid.
How do I fill out the FAFSA?
You can access the FAFSA, as well as additional information and resources at https://studentaid.gov/. Your tax data can be directly imported from the IRS, saving you time and reducing the chance of errors.
Both you and your child/student will each need a federal student aid ID, which can be completed online and reused each year that you fill out the FAFSA. You must fill out the form each year to remain eligible for federal financial aid. Colleges or universities listed on your FAFSA receive a copy of the report as well.
Should I fill out the FAFSA if I think our family will not have demonstrated financial need?
The answer to this question depends on a number of factors that make up the unique financial circumstances for your family. In general, there are a couple of good reasons to fill out the FAFSA even if you don’t expect to qualify for need-based aid.
First, the FAFSA is simpler than ever! A new simplified form of the FAFSA is being released this year and it has just 36 questions to answer, down from the 108 of previous years!
Second, many colleges require the FAFSA for determining their own forms of aid, like need-based aid or even as a prerequisite for merit aid. And finally, it is free to fill out and keeps your financial options open if something should change in your financial life from the time you fill out the FAFSA to the time enrollment begins.
What information does the FAFSA collect?
The FAFSA is a tool that gathers information about a family’s income, assets and household information like family size to determine expected family contribution (EFC), student aid index (SAI) or what a family theoretically can afford to contribute to the education of the student in question. Some assets, such as home equity in your primary residence, retirement accounts, annuities and cash-value life insurance, are not counted and do not need to be listed on the form.
The EFC/SAI remains constant for that student, and the difference between the cost of attendance and this number is a student’s financial need. The financial aid department at the college or university will use a variety of tools like loans, grants, scholarships and work-study to create a financial aid package that partially or fully meets the financial need of a student.
Are colleges required to meet 100% of the difference between cost of attendance and financial need?
Colleges and universities are not required to meet the financial need in total. You and your child are responsible for making up the difference. While information about whether a school meets 100% of demonstrated financial need is often communicated via their website or brochures, it is a great question to ask the financial aid office at an institution you or your child are interested in attending.
Is the FAFSA the only way to help pay for college?
Aid that requires the FAFSA is not the only way to pay for college. For example, tax-advantaged 529 Plans are another popular method of saving and paying for higher education. While some parents and families feel they must put paying for college above saving for retirement, this can hurt your long-term financial strategy.
Don’t feel like you have to make the numbers work all on your own. A financial advisor, like those in our Investment Management Group, can be your best bet in working through a financial strategy and plan that meets the needs, wants and goals of your family. Through all of your life stages, from sending your kids to college to living your best life in retirement and everything in between, Rockland Trust’s Learning Center offers free resources and expert advice to strengthen your financial acumen and help you reach that next goal or milestone.
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