College has become increasingly expensive, and the number of American families who can afford it outright is shrinking. In fact, education data shows that about 85.5% of first-time college students apply for some form of financial aid.
The process usually starts with completing the Free Application for Federal Student Aid (FAFSA), which can feel anywhere from a little stressful to entirely overwhelming. But a FAFSA is essential if you’d like to be considered for federal grants (such as Pell Grants), work-study programs, and relatively low-interest federal loans to help cover your college costs. Here’s a guide to make things a little easier — and to help you spot key financial issues that may affect your application.
Before You Begin, Be Aware
You are probably already very aware of the looming cost of college. But in the years before you apply for federal financial aid, there are steps you can take to make the FAFSA process easier and increase your likelihood of being eligible for federal student loans, rather than relying solely on private student loans. Here are some things to consider in the time leading up to your FAFSA:
- If you’re saving for college, choose parent‑owned 529 plans over custodial accounts in the child’s name. When you apply for federal financial aid through the FAFSA, assets are assessed differently depending on who owns them. For FAFSA purposes, parent‑owned 529s are treated as parent assets, and custodial accounts (such as UGMA/UTMA accounts) are treated as student assets. Parent assets are assessed at a lower maximum rate toward the expected family contribution, so for most middle-earning families, 529s are the better choice. Of course, talk with your own financial professional about what’s best for your family.
- Use cash to pay down consumer debt or make planned big purchases before filing. You’ll be more likely to be assessed favorably for federal student loans if you don’t have extensive cash on hand. So, choose to pay off consumer debt in the years ahead of college. This reduces the amount of cash you’ll be required to report without increasing assets.
- Max out your retirement contributions where possible. Qualified retirement accounts such as 401(k)s, IRAs, and Roth IRAs are generally not reported as FAFSA assets, so moving savings into retirement can both improve your aid eligibility and support long‑term planning.
- Watch your income as well as assets. Large bonuses, investment sales, or distributions in the “base year” can increase the income side of the financial aid formula, and some advisors suggest timing or deferring these events when possible. If you’re planning a big financial decision in the year or two before college, talk it over with a financial professional.
- Know when assets might be ignored anyway. Under the “simplified needs test,” some families with parent income under a certain threshold (often around $60,000) don’t have to report assets anyway, meaning that complex asset shifting offers little benefit.
- Save all your important paperwork. If you know that you’ll need to complete your FAFSA, pay close attention to your documentation ahead of time. When you complete your taxes, keep all of the supporting information in a safe place, including your federal tax forms and W-2s. Keep track of all your accounts, account numbers, and passwords. Save financial documentation that you receive in the mail. If you go into the financial aid process with a clear idea of where your financial information is, you can just dust it off and get going. Your life will be a lot easier, and the process may be a little bit less stressful.
Step 1: Create Your StudentAid.gov Account
Everyone who will be required to submit information related to their federal financial aid needs their own StudentAid.gov account. (Each family is different, but that often means the student and a parent, both parents, a guardian, or a spouse.)
To start an account, you’ll need your Social Security number (if you have one) and your own email address. The process is relatively quick — an estimated 7 minutes to get started.
Step 2: Log In and Start Your FAFSA Online
Next, log in and start your FAFSA online at studentaid.gov. Applying online is the fastest way to apply for federal financial aid and helps reduce errors in the application process. While it is possible to complete a FAFSA by mail, almost everyone completes it online.
Step 3: Answer Student and Parent Questions
The FAFSA asks for information about the student and, if required, the parents or other people who may contribute to the student’s education, depending on dependency status. You’ll be asked to complete some questions accordingly.
The exact questions vary from year to year, but you should expect questions about your full legal name, date of birth, address, marital status, citizenship or eligible noncitizen status, high school completion status, and more.
Step 4: Add Your Schools
Students can list up to 20 schools on the FAFSA. You should include any college you’re seriously considering. You can always update the list later if you need to.
Step 5: Provide Financial Information
The FAFSA collects income and asset information used to determine eligibility for federal financial aid. In the last few years, this has gotten a bit easier. The FAFSA now uses the IRS Direct Data Exchange (DDX). That means that instead of typing information from a tax return, contributors just provide consent for the IRS to share their federal tax information with the U.S. Department of Education. The FAFSA securely retrieves the relevant tax information, such as your adjusted gross income, which is used to calculate your financial aid responsibility.
You still may need to enter some financial information manually. This includes:
- Your current cash, checking and savings account balances
- The value of your investments (but not retirement savings accounts)
- The value of investments, businesses and farms
It’s important to note that you won’t need to mail the documents to the financial aid office. After you’re done with the FAFSA, they stay with you. However, you’ll need to keep them in a safe spot, just in case.
Step 6: Sign and Submit Your Financial Aid Application
Students and parents use their FSA IDs to electronically sign the FAFSA. Don’t forget to “submit” on the form and save your FAFSA submission summary when you get it. The summary confirms that the U.S. Department of Education received your application. You should generally expect to receive it within 1-3 days of submitting your application. Colleges receive your FAFSA information around the same time.
Step 7: Get Your Results
FAFSA submission isn’t the end of the process, of course. Each college must review your FAFSA and determine your financial aid package based on their specific cost of attendance. Depending on when you apply to your schools, the financial aid offers may arrive within a few weeks to a few months.
Then all that’s left is to choose the right school, enroll, choose a major, complete all your coursework, get good grades, graduate, find a job, and pay back your student loans — so it’s a piece of cake after the FAFSA! Best of luck, and may you learn a lot and have the time of your life along the way.
