Your Guide to Federal Financial Aid, the FAFSA and More

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For many students, federal financial aid is the lifeline that funds their college degree.

In fiscal year 2018, about 12.7 million students received federal student aid, according to the most recent data from Federal Student Aid. These students received more than $122.4 billion in federal grants, loans and work-study funds.

Here’s what you need to know about federal financial aid, including FAFSA 2019-20 details and the types of assistance you can receive:

Do you have to fill out the FASFA?
When should you file? Do you have to fill out the FASFA every year?
The FAFSA process, step by step
What types of federal financial aid are available?
What if you don’t plan to use federal aid or student loans?

FAFSA: Your key to federal financial aid

What is the FAFSA? The Free Application for Federal Student Aid (FAFSA) is the form that unlocks access to federal financial aid.

Completing and submitting the FAFSA is often the first step in applying and qualifying for federal student aid. Students should submit this form well ahead of the FAFSA deadlines for the school year. Doing so will help them establish or renew their eligibility for federal financial aid.

Do you have to fill out the FASFA?

Many people ask, “Do I have to fill out the FASFA?” Strictly speaking, filling out the FAFSA is not a requirement for attending college.

However, the FAFSA is a requirement for most need-based financial aid, as well as many scholarships programs. So, if you hope to secure any kind of federal financial aid to pay for college — from grants to federal student loans — you’ll need to submit the FAFSA each year.

Filing it out can be time-consuming and complicated. But even if you don’t plan to use this aid, you should still consider completing this document.

When should you file? Do you have to fill out the FASFA every year?

The FAFSA opens each Oct. 1 for the following school year. Students and parents usually have until that academic year ends on June 30 to file a FAFSA.

  • Submissions opened Oct. 1, 2018, for the 2019-20 award year and will remain open until June 30, 2020
  • Submissions opened Oct. 1, 2019, for the 2020-21 award year and will remain open until June 30, 2021

That doesn’t mean you should put off filing your FAFSA, though. Students should file as close to Oct. 1 as possible. Doing so early can help with limited funding, such as state grants, that could be available on a first-come, first-served basis.

Some states, colleges and universities have their own deadlines to receive FAFSA information for additional non-federal aid. The University of Maryland, for example, sets a priority deadline of Jan. 1 for its students. Check your college’s website or talk to your financial aid office to see when you must complete the FAFSA to meet these deadlines.

 The FAFSA process, step by step

Step No. 1

How long does the FAFSA take to complete? Most people can fill it out and submit it in one hour. You can get started here.

Step No. 2

After submitting your FAFSA, you’ll get a Student Aid Report with an overview of your application and eligibility. You should review this for errors. You’ll receive your report in anywhere from three to five days to three weeks depending on how you filled out your FAFSA.

Step No. 3

If you see any errors on your Student Aid Report, you need to update your FAFSA online. This should only take about 10 minutes.

The FAFSA offers tools to simplify the filing process and prevent errors. If you’ve filed a FAFSA in the past, for instance, you can automatically input the information you provided in a previous FAFSA to your current application. Plus, the IRS Data Retrieval Tool can be used to automatically fill your FAFSA with relevant tax information.

Step No. 4

Your college will then review your FAFSA and other enrollment materials. If it puts together a financial aid award letter, this often comes around the same time as an admissions letter, though this can vary by school. The award letter would outline your aid package, including federal student aid, institutional aid and loans.

Step No. 5

Next, you should review your financial aid award letter and decide on the aid you will use to pay for college. Follow the instructions in the letter to accept and claim your financial aid. You need to claim the aid by the start of the term for which you are using it.

Step No. 6

If you decide to appeal your financial aid award letter before accepting it, your first step should be to call your school’s financial aid office and ask about the specifics of its appeal process. From there, you’ll write a letter explaining the reasons behind your request for an appeal. You’ll also want to include any supporting documentation, such as bank statements or copies of your award letters from other schools, with your letter. Then, you’ll want to send the letter to the appropriate office at your school and follow up to confirm receipt.

Types of federal financial aid

We will break down the main kinds of federal financial aid in two categories:

  • Need-based aid
  • Non-need-based aid

Before we do that, note that the information on your FAFSA is run through a formula that determines a student’s ability to cover college costs and the need for financial aid. Here is what it uses:

  • Cost of attendance (COA), or the total cost to attend a specific college, including all tuition, fees, educational expenses and living costs
  • Expected family contribution (EFC), which is the amount you and your family should be able to pay toward college costs, according to Federal Student Aid calculations

The formula to calculate financial need is COA minus EFC.

The higher a student’s need for federal student financial aid, the more need-based aid they will be granted. The lower it is, the more likely it is that the student will qualify for little to no need-based aid.

So, now, let’s look at need-based aid versus non-need-based aid.

Need-based aid: Grants, work-study and subsidized loans

Need-based federal financial aid is designed to help students from low-income backgrounds enroll and stay in school. Some need-based aid is essentially money you don’t have to repay. Here are the main types of need-based federal student aid.

Federal Pell Grant

Most often awarded to undergraduate students, Pell Grants are available to students who display exceptional financial need. They typically don’t need to be repaid. The amount of aid you can receive depends on the following factors:

  • Your EFC
  • The cost of attendance
  • Your status as a full-time or part-time student
  • Your plans to attend school for a full academic year or less

The maximum Pell Grant award for the 2019-20 school year is $6,195.

Federal Supplemental Educational Opportunity Grant (FSEOG)

This award is administered by your college’s financial aid office through federal funding. Not all colleges participate, but if yours does, it will use your FAFSA information to determine if you qualify. FSEOG awards, which also typically don’t need to be repaid, can range from $100 to $4,000 a year.

Federal work-study

Under federal work-study, students work part time, and their pay is subsidized by the federal government up to a certain number of hours each semester. This form of aid acts as typical wages. Undergraduates, for example, are paid by the hour. With work-study, you’ll earn at least minimum wage, and the money you earn doesn’t need to be repaid.

Direct subsidized loans

Direct subsidized loans have to be repaid by the student. The federal government pays your interest while you’re enrolled at least half time, during your six-month grace period after leaving school and if you’re in deferment. For loans disbursed on or after July 1, 2019, and before July 1, 2020, undergraduates would pay an interest rate of 4.53%.

When would I have to repay a federal grant?

You may be responsible for repaying your federal grant if:

  • You receive outside scholarships or grants that reduce your need
  • You withdraw early from your program
  • An enrollment status change reduces your eligibility
What if you don’t qualify for need-based aid?

Even so, it’s worth the time to file. In fact, the complexity of the FAFSA is a reason you should file, said Lynne Baker, managing director of communications for the Illinois Student Assistance Commission.

“The formula used to determine financial aid eligibility is very complex,” Baker said. “The way to determine how assets may impact eligibility is to complete the FAFSA.”

It’s possible you’ll qualify for aid you might not have expected. The only way to know for sure is to file and see for what you get approved. That’s especially true for first-time filers or filers whose income, dependent status or other relevant factors have changed recently.

Non-need-based aid: Unsubsidized loans and grants

If you don’t qualify for need-based student aid or can’t cover all your costs, don’t worry. A few types of student loans don’t require a student to demonstrate financial need. There are also a few non-need-based federal grants.

Direct unsubsidized loans

Undergraduate students can take out direct unsubsidized loans. However, these loans don’t have an interest subsidy, while they do have higher federal student loan limits (as we discuss later). The interest rate for undergraduate students is 4.53% for loans disbursed on or after July 1, 2019, and before July 1, 2020.

PLUS loans

There are two types of PLUS loans:

Parents and graduate students can borrow PLUS loans up to the college’s cost of attendance not covered by other forms of student aid. The interest rates on PLUS loans depends on when the first loan was disbursed. Loans disbursed on or after July 1, 2019, and before July 1, 2020, will have an interest rate of 7.08%.

Teacher Education Assistance for College and Higher Education (TEACH) Grant

The TEACH Grant provides assistance to students who are completing coursework related to teaching. The maximum award benefit is typically $4,000 a year; however, any 2019-20 TEACH Grant first disbursed on or after Oct. 1, 2019, and before Oct. 1, 2020, is reduced by 5.9% ($236), for a total of $3,764.

To qualify for this award, students must sign a TEACH Grant Agreement to Serve in which you agree to teach:

  • In a high-need field
  • At an elementary school, secondary school or educational service agency that serves students from low-income families
  • For at least four academic years within eight years after completing the course of study for which you received the grant

If you don’t fulfill the requirements, your grant becomes a loan you must repay.

Iraq and Afghanistan Service Grants

Iraq and Afghanistan Service Grants are available to students who have a parent or guardian who died as a result of military service in Iraq or Afghanistan after 9/11. The award is equal to the Pell Grant, meaning that eligible students can receive up to $6,195.

However, for any 2019-20 grant first disbursed on or after Oct. 1, 2019, and before Oct. 1, 2020, the maximum award amount is reduced by 5.9% ($365.50), for a total of $5,829.50.

How much can you receive in subsidized and unsubsidized loans?

As of 2019, dependent students can receive up to $31,000 in subsidized and unsubsidized loans. Up to $23,000 of that can come from subsidized loans.

Independent students or dependent students whose parents are unable to qualify for Parent PLUS loans can borrow up to $57,500 in loans, $23,000 of which can be subsidized.

Graduate and professional students may borrow up to $138,500 for their studies, $65,500 of which may be from subsidized loans.

What if you don’t plan to use federal aid or student loans?

Filling out a FAFSA every year is still a good idea. It gives you access to federal student loans and other resources to help cover costs. Even if you don’t plan to use them, you might encounter unforeseen financial hardships or unexpected problems that could leave you reliant on federal student aid.

If you don’t file a FAFSA, by the time you realize you need to take out federal student loans, it might be too late. As you get ready to pay for college, remember there are plenty of federal student aid options for you to explore. Make sure you take the time to review them.

If your educational costs are higher than the federal limits, private student loans are an option to cover the remainder. They often offer flexible interest rates and repayment terms. However, before you sign on the dotted line, you want to be sure to do your research and feel comfortable with the terms of your agreement.

Tara Mastroeni contributed to this report.