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'It gets confusing fast': FAFSA financial aid for students, explained

Katie Krzaczek
Associate Editor

The Free Application for Federal Student Aid (FAFSA) opened this week, providing college and university students with the opportunity for financial assistance.

Despite it being an annual task, many students and their families still aren’t clear on the FAFSA process and whether or not they must apply.

“It gets confusing fast,” Rebecca Safier of Student Loan Hero told Yahoo Finance. Student Loan Hero conducted a survey last month that revealed some of the most commonly held myths about applying for financial aid.

Safier’s one piece of advice: “It’s worth it for everybody to submit” the FAFSA.

Northwestern Wildcats freshman run across the field before a college football game between the Michigan Wolverines and the Northwestern Wildcats on September 29, 2018, at Ryan Field in Evanston, IL. (Photo by Daniel Bartel/Icon Sportswire)

‘The one form that unlocks the door’

Though not a requirement, the FAFSA is the only way for students to qualify for a number of financial aid programs — even beyond federal programs.

Read more: Student loan watchdog quits: Trump admin ‘turned its back on young people’

“Even if you don’t think you’ll take out student loans, or you don’t think that you’d qualify, submit the FAFSA,” Safier advised. She added that some private organizations and some states look at FAFSA applications when considering who will qualify for aid independent from the federal loans and grants awarded.

There are a number of aid options available, so decoding how you might or might not qualify can be puzzling. Frank, an organization that provides information to make aid application easier, breaks down each kind of financial aid. The website also provides a step-by-step FAFSA application.

Safier described the FAFSA as “the one form that unlocks the door to financial aid.”

Early FAFSA submission could mean more money

Aside from knowing whether or not they should submit the FAFSA, many students aren’t aware that submitting earlier may actually lead to being awarded more financial aid.

A full 71% of respondents said it doesn’t matter when they submit the form, as long as they meet the deadline, which comes at the end of the academic year. Safier warns this is one way to ensure you will receive little or no financial aid.

“Some financial aid is distributed on a first come, first-serve basis,” she told Yahoo Finance. Especially with private organizations or state programs that award based on the FAFSA application, the rule applies: The earlier you submit, the more aid you may receive.

How much aid will you qualify for?

Another big myth about the FAFSA: Families with more money will not receive any or much aid because of their wealth. Of those surveyed by Student Loan Hero, 62% believe that high family income disqualifies a student from receiving aid.

Actually, the application estimates “the EFC (estimated family contribution) which is the difference between the cost of attendance and what your family is expected to contribute,” Safier said.

This varies based on the institution you’re attending. Even if a student’s EFC is higher, he or she might still qualify for merit-based aid. That is separate from need-based aid, such as direct subsidized loans or Pell grants.

A man looks at his mobile phone beside a sign for Harvard University in Cambridge, Massachusetts, U.S., June 18, 2018. REUTERS/Brian Snyder/File Photo

For example, a student attending a pricier, private college that boasts a bigger price tag may still receive some merit-based aid.

“These schools have larger endowments,” Safier noted, which allow for more merit-based awards to help offset the higher costs of attendance.

Along with taking family income into account, the FAFSA also helps to provide information to schools regarding how many other children are in your household and if they’re also enrolled in college. All of these factors play into how much aid you may be awarded, whether through federal, state, or private aid programs.

“When a family goes from having one child in college to two, it can be like dividing the parent income in half,” Mark Kantrowitz, financial aid expert and vice president of research at Savingforcollege.com, told Student Loan Hero.

The most important thing, Safier stressed, is to be sure you submit the form each year you’re enrolled in college.

“It’s really important to not leave money on the table,” she said.

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This post was originally featured on October 1, 2018.

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