Federal financial aid: For many students, it’s the lifeline that funds their college degree.
In 2014-15 alone, federal student aid made higher education accessible for more than 2 million college students. That’s 86 percent of enrolled full-time students, according to the most recent data from the National Center for Education Statistics.
Here’s everything you need to know about applying for federal student financial aid and when you can expect to receive funding.
FAFSA: Your key to federal financial aid
The Free Application for Federal Student Aid (FAFSA) is the form that unlocks access to federal financial aid.
Completing and submitting a 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 for that enrollment period.
Submitting a FAFSA is required for federal financial aid
Strictly speaking, filling out a FAFSA is not a requirement for attending college.
“A family is free to opt not to apply for financial aid and to not complete a FAFSA,” said Lynne Baker, the managing director of communications for the Illinois Student Assistance Commission.
However, as Baker pointed out, the “FAFSA is a requirement for almost all need-based financial aid and many scholarship 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 a FAFSA each year.
Filing the FAFSA can be time-consuming and complicated. But if you don’t file the FAFSA, you won’t be eligible for any federal student financial aid. Even if you don’t plan to use this aid, skipping the FAFSA could mean losing out on aid from a variety of sources.
When should I file the FAFSA?
The FAFSA opens every year on Oct. 1 for the following school year. Students and parents usually have until that academic year ends on June 30 to file a FAFSA. So, for example, submissions opened on Oct. 1, 2017, for the 2018-19 FAFSA and will remain open until June 30, 2019.
That doesn’t mean you should put off filing your FAFSA, though. According to Baker, the earlier you file the FAFSA, the better.
“Students should file their FAFSAs as soon as possible after Oct. 1 of the calendar year prior to the year they plan to attend school,” Baker advised. “Filing as early as possible puts you in line for some aid, such as some state grants, that has limited funding and may be offered to eligible students on a first-come, first-served basis.”
Some states, colleges, and universities have their own deadlines to receive FAFSA information for additional, nonfederal aid. Check your college’s website or talk to the financial aid office to see when you must complete the FAFSA to meet these deadlines.
How long does the FAFSA take to complete?
“Many families decide not to complete the FAFSA simply because it is too complicated or they believe they make too much money to be eligible for anything,” Baker said. “Take the time to understand the FAFSA, the eligibility requirements, and how the information is used.”
The FAFSA also offers tools to simplify the filing process and prevent errors, Baker added.
If you’ve filed a FAFSA in the past, for instance, you can automatically input the information you provided in your previous FAFSA to your current application. Plus, the IRS Data Retrieval Tool can be used to automatically fill your FAFSA with relevant tax information.
Altogether, completing a FAFSA takes about an hour from start to finish, according to the official FAFSA site. Below is a timeline for submitting a FAFSA and getting your financial aid award:
Evaluating your financial aid award letter
Once you submit a FAFSA, the next step is for your college to evaluate your need and put together a financial aid package.
This package is outlined in a financial aid award letter and will include a complete list of student aid offers. The federal student financial aid you can get will be listed in addition to state aid, institutional aid, and private student loans.
From there, it’s your job to evaluate the student aid you’re offered and decide which types you should use first and how much. Here are the basics of what you need to know about how federal financial aid is determined and awarded.
Types of federal financial aid
There are two main kinds of federal financial aid: need-based aid and non-need-based aid. The FAFSA information is run through a formula that determines a student’s ability to cover college costs and need for financial aid, as illustrated below:
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.
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 free money you don’t have to repay. Here are the main types of need-based federal student aid.
Federal Pell Grants
Awarded to first-time undergraduate students, Pell Grants don’t need to be repaid. The maximum Pell Grant award was $5,920 for the 2017-18 school year.
Federal Supplemental Educational Opportunity Grant (FSEOG)
This award is administered by a college’s financial aid office but uses federal funds.
Not all colleges participate, but if yours does, it will use FAFSA information to determine if you qualify. FSEOG awards can range from $100 to $4,000 and don’t need to be repaid.
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 and doesn’t need to be repaid.
Direct Subsidized Loans
Direct Subsidized Loans have to be repaid by the student. They also carry an interest subsidy, which applies when a student is enrolled full time or otherwise defers their student loan payments.
During this deferment, interest charges are paid by the federal government rather than accruing and being added to the balance.
Non-need-based aid: Unsubsidized student loans
If you don’t qualify for need-based student aid or can’t cover all your costs with need-based aid alone, don’t worry. A few types of student loans don’t require a student to demonstrate financial need.
Direct Unsubsidized Loans
Undergraduate students might take out Direct Unsubsidized Loans, which operate under the same program as Direct Subsidized Loans.
Unlike Direct Subsidized Loans, however, Direct Unsubsidized Loans don’t have an interest subsidy. They do have higher federal student loan limits, though, as well as the lowest interest rates and fees of any federal student loans.
There are two types of PLUS Loans: Parent PLUS Loans, which are available to parents of undergrads, and Grad PLUS loans, which are available to graduate students.
Parents and graduate students can borrow PLUS Loans up to the college’s cost of attendance not covered by other forms of student aid. But be warned: PLUS loans have higher interest rates and loan fees.
What if you don’t qualify for need-based aid?
Maybe you haven’t qualified for much financial aid in the past or don’t think you’ll receive federal aid for the coming school year.
Even so, it’s worth the time to file. In fact, the complexity of the FAFSA is actually a reason you should file, Baker said.
“The formula used to determine financial aid eligibility is very complex,” Baker pointed out. “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 what you’re approved for. That’s especially true for first-time filers or filers whose income, dependent status, or other relevant factors have changed recently.
Your FAFSA information “may also be used by schools to determine eligibility for institutional financial aid,” Baker said. “So if you don’t file a FAFSA, you might not get the opportunity to be considered for [need-based institutional aid] or partially need-based institutional aid.”
That means not filing your FAFSA could keep you from being considered for scholarships and similar programs.
What if you don’t plan to use federal aid or student loans?
Let’s say you don’t think you’ll need federal aid or loans because you or your family can afford to pay for college out of pocket.
Well, 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.
Maybe a parent becomes unemployed and is no longer able to cover college costs. Or perhaps a medical emergency means your family’s financial resources are needed elsewhere. By filing your FAFSA, you can ensure your access to federal student loans if you need them.
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. It’s better to file your FAFSA and have the option to take out federal student loans than to need the opportunity and not have it.
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 all of them and fill out the FAFSA to see what you qualify for.
Need a student loan?Here are our top student loan lenders of 2018!
|1 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or Nationwide Bank, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 11/1/2018. Variable interest rates may increase after consummation.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.94% – 12.78%1||Undergraduate, Graduate, and Parents|
|4.06% – 13.06%3||Undergraduate and Graduate|
|4.34% – 12.99%2||Undergraduate and Graduate|
|4.25% – 11.10%*,4||Undergraduate and Graduate|
|5.03% – 11.23%5||Undergraduate and Graduate|
|4.12% – 13.13%6||Undergraduate and Graduate|
|5.62% – 10.01%7||Undergraduate and Graduate|
|3.93% – 9.81%8||Undergraduate, Graduate, and Parents|
|4.26% – 12.13%9||Undergraduate, Graduate, and Parents|