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23% of Families Miss This Big Opportunity to Save Money on College

Maurie Backman, The Motley Fool

College is an expensive prospect, whether you attend a public in-state school or opt for a private education. In fact, many students have no choice but to apply for financial aid to swing their college costs, and if you're planning to do the same, there's one relatively simple form that could be your ticket to it: the FAFSA. 

Short for Free Application for Federal Student Aid, the FAFSA is a form that typically gets completed once a year. Though filling out the FAFSA does require a modest time commitment, the upside is that by doing so, you open the door to free money or affordable student loans for college. 

A mom chatting with her teen daughter as she works on her homework.

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If you want to take out federal loans for your studies, which generally come with much more favorable borrowing terms than private loans, then the only way to secure them is via the FAFSA. The same holds true for federal grants that you never have to pay back. And if you're hoping to get a job through the federal work-study program, the FAFSA is a must.

Despite all of this, an estimated 23% of families don't complete the FAFSA when applying to colleges, and as such, lose out on a world of financial aid, according to Sallie Mae. If you or someone in your family is heading to college in the not-so-distant future, then it pays to give the FAFSA a go.

Why are families skipping the FAFSA?

A big reason some people don't bother with the FAFSA is that they're convinced they won't qualify for federal aid. Such is the case for 39% of those who didn't fill it out in 2019. But actually, there are different factors that determine who is and isn't eligible for federal aid for college, and household income is only one of them. Other factors, like family size, are taken into account. Plus, the cost of the school you're applying to is considered when determining how much aid you need, so even if your household income is somewhat high, if your college costs are also high, you could still qualify. 

Meanwhile, 27% of families didn't fill out the FAFSA last year because they were either missing information for it, didn't have time to deal with it, or felt the process was too complicated. In reality, the form is fairly straightforward once you gather all of the right information, and much of the financial data you'll include on the FAFSA comes right off your tax return. You'll also need to know your savings, checking, and investment account balances, as that information will come into play as well. 

Finally, 29% of families that didn't complete the FAFSA last year skipped it because they either didn't know about it or missed the deadline. If you're interested in filling out the FAFSA for the 2020-2021 academic year, you should know that the Department of Education has been accepting that form since October 2019, and that the deadline to submit it is June 30, 2021. But that's just the federal deadline -- different states have their own deadlines, some of which could be creeping up early in 2020, so do some digging to see when your form is due. 

Another thing you should know about federal aid is that many programs award it as it's applied for. In other words, if you wait too long to fill out the FAFSA, you'll risk missing out on aid you may have qualified for by applying sooner. 

Though filling out the FAFSA may not be the most fun way to spend an afternoon, it's a worthwhile step to take if your goal is to make college as affordable as possible. If you don't make that effort, you may find that the schools you want to attend are financially out of reach, or that you're stuck taking out private loans with high interest rates, which can make repaying them more painful than necessary.

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23% of Families Miss This Big Opportunity to Save Money on College was originally published by The Motley Fool