If you’re a student or a parent with your sights set on college, you’ve likely heard of the FAFSA application. For many families, filling out the FAFSA is a huge part of saving money on college tuition through accessing need-based financial aid.
How so? There are billions of dollars of financial aid available each year from many institutions including the federal government, states and colleges, in the form of loans, grants, work-study programs, and scholarships. These entities require applicants to submit the FAFSA so they can distribute financial assistance based on how much families earn.
Need-based financial aid is one way to reduce the cost of college, alongside various types of scholarships. You should look into all of these avenues of possibility, but this article will focus on the FAFSA, which is one of the most centrally important pieces of any financial aid application.
What is the FAFSA?
The FAFSA stands for the Free Application for Federal Student Aid. In order to apply for financial aid, students often have to submit a FAFSA application.
To fill out the FAFSA, students use their families’ tax information from the previous year. So, seniors applying to college in the fall of 2017-2018 will use tax information from 2016.
Students receive federal aid through participating colleges, which means that financial assistance varies by the availability at colleges.
How to Receive Federal Aid via the FAFSA
The federal government requires that applicants submit the FAFSA to help colleges determine who gets how much financial assistance.
The financial information provided on the FAFSA makes up an applicant’s Expected Family Contribution (EFC), which is subtracted from the cost of college attendance (COA) to determine financial need.
That might sound complicated, but it’s not. Here’s the formula for federal financial assistance:
COA (Cost of college attendance) – EFC (Expected Family Contribution) = Amount of need that can be provided by the U.S. Department of Education
Families are notified of their Expected Family Contribution after submitting the FAFSA. The U.S. Department of Education provides this information in the Student Aid Report (SAR), delivered two weeks after submitting the FAFSA.
That doesn’t mean you can’t get a head start. To get a sense of how much financial aid you’ll receive before viewing your Student Aid Report, you can approximate Expected Family Contribution with the Quick EFC Calculator.
What Types of Financial Aid are Provided by the Federal Government?
Colleges provide families with financial assistance system through the following federal programs:
- Federal Pell Grants
- Pell Grants are financial awards that you usually don’t have to pay back. Families receive Pell Grants through participating colleges, from the federal government.
- Direct Subsidized Loans and Indirect Subsidized Loans
- Also referred to as Stafford Loans, Direct and Indirect Subsidized Loans are loans made by the federal government, the amounts of which are determined by