Your Guide to Getting Through the FAFSA

Don't think you can afford college? You're not alone. Roughly 85% of all first-year students are awarded college financial aid for their study at four-year institutions. But in order to get that help, you have to apply for financial aid through the U.S. Department of Education. Use this FAFSA guide to help you not only apply for aid but understand what your financial options are.

We're going to run down some basics, some terms, and the simple process of how to apply with the FAFSA. Application tips are good, but it's also very important that you understand what you'll see in return and what you'll be signing up for. Which loans will have federal help in terms of interest? Which type of student financial aid is preferred? We'll cover this and much more!

Answers To Common FAFSA Questions

What is "FAFSA"?

The FAFSA is a form needed in order to be eligible for many kinds of student loans and aid. What does "FAFSA" stand for? It's the Free Application for Federal Student Aid.

When is the FAFSA due?

The forms typically become available for the next year in early October, and the FAFSA deadline is typically in late June. Note that your state will have its own FAFSA due date as well, so if you're hoping for state aid, too, check when your deadlines will be. The best month to fill out the FAFSA is January, or really as early as possible, since some schools award aid on a first-come, first-served basis.

What do you need to fill out the FAFSA?

Here's a quick checklist of FAFSA requirements:

A Social Security number (or an alien registration number if you're not a U.S. citizen)
Your tax information (W-2s, income tax returns, and income records)
An FSA ID
Bank statements, records of investments, and records of untaxed income, if applicable
Your parents' income and tax information, if you are still a dependent

What are the requirements for applying?

To qualify, you must be a U.S. citizen or eligible non-citizen (permanent resident, refugee, or other select cases), have a Social Security number (or alien registration number), and have a high school diploma or GED. You must be entering or enrolled in an eligible degree program, and you must maintain satisfactory academic progress. You cannot apply if you're in default on a current loan or have a drug conviction.

Do you have to fill out the FAFSA every year?

Yes, you need a FAFSA renewal every year, which means your aid and eligibility might change.

A Glossary of Financial Aid Terms

It's easy to get lost in the weeds with details on the form, so here's a basic rundown of what things mean as you come across the terms in your application:

Accreditation - This is an important question to ask: Is your college accredited? That means that it's met the academic standards of a peer-reviewing group. Contrary to what might seem logical, "regional" is often a better measure of accreditation than "national."
Consolidation - Sometimes, in order to pay loans back, it's useful to combine a few loans together into one payment.
Cost of Attendance (COA) - This is the total cost of going to your school, including fees, tuition, room, board, and allowances.
Default - It's pretty hard to get out of a loan, and defaulting doesn't mean you get to stop paying. It means you haven't made a payment in 270 days or more. It's a very bad thing. This often comes with legal consequences, and you usually still accrue interest during this time.
Deferment - If you feel like you can't make payments, you may be able to temporarily postpone them rather than defaulting. It depends on certain conditions and the loan itself. For instance, if you're out of a job, you can officially apply for a deferment so that your direct subsidized loans won't accrue interest. Other types of loans will likely accrue interest during that time, however.
Enrollment Status - This has to do with your credits and attendance every semester. Are you going to school full-time or part-time?
Expected Family Contribution (EFC) - Based on your parents' income and other data, the government creates a number that will help determine your eligibility for federal aid. You can find it on your SAR, or student aid report.
Federal Work-Study - Federal work-study is a unique program that's often somewhere between a loan and a job. It's funds the government provides for part-time employment at your school. You definitely should try to apply for job openings as early as possible!
Forbearance - If you can't make payments, you may qualify for a deferment or forbearance. With deferment, you may qualify for not having to pay interest for that period, depending on the type of loan. With a forbearance, you usually have to pay interest for that period. Sometimes, a forbearance merely lowers your monthly payments rather than skipping months entirely.
Forgiveness - In very rare cases, your student loans may be forgiven. (This may also be referred to as a "cancellation" or "discharge.") It only applies to a handful of situations, such as the Teacher Loan Forgiveness Program.
Grace Period - There is a small window of time after you graduate when you don't need to immediately start paying your loans. It's usually six to nine months long and allows you time to find a job. It also can take effect if you leave school or drop below half-time enrollment. That being said, you'll still have to pay interest for that period for most types of loans.
Graduation Rate - When you research colleges, it's important to look at the school's graduation rate. It's a measure of how many full-time, first-degree-seeking students graduate within 150% of the normal time it takes to complete the degree program. Online colleges typically have low graduation rates.
Grant - This is financial aid that you do not need to pay back!
Income-Driven Repayment (IDR) Plan - In the worst-case scenario, if you're making far less than you expected to with your new degree, you can file for a different repayment plan that's based on how much you make, which would lower your minimum payments but extend the life of your loan.
Interest Rate - Interest is the amount the bank can charge you for using their money, and the rate is the percentage at which it's calculated. A high interest rate means more money being charged. Student loan interest rates vary a great deal, from around 2.5% to as high as 15%, so it's definitely an important factor to consider when you're signing up for a loan!
Lender - This is the organization you'll be borrowing from, usually a bank, a credit union, or the school itself.
Master Promissory Note (MPN) - This is an important contract that you'll sign when you're ready to commit to the loans. Usually, before you sign, you'll need to complete entrance counseling, where you'll learn more about how these loans work.
Need-Based - Students with a high financial need might be awarded need-based grants or need-based loans.
Principal - The principal is the total sum of money borrowed. Interest is calculated using the principal balance. If your were to overpay, it's important to make sure that would lessen the principal of your loan.
Private Loan - This is a non-federal loan made by a different lender. They typically have higher interest rates and longer terms.
Satisfactory Academic Progress - Schools have standards in terms of their loan programs for the grades and progress you need to meet every year in order to get grants and loans. Each school has its own standards that you need to meet so you don't lose your financial aid.
Scholarship - This is money, usually awarded by a school or group, that usually doesn't need to be repaid.
Student Aid Report (SAR) - This is a summary of your completed FAFSA, which has important details like your expected family contribution (EFC).

How to Fill Out the FAFSA, Step by Step

Here's a quick rundown of what the process will be like:

Step 1: Get your FSA ID - Create a new FSA ID. You'll need your own email address, username, and password.
Step 2: Start the FAFSA - Go here to start filling out your forms. (Note that you won't be able to begin before October of the prior school year.)
Step 3: Enter in your basic information - Enter in your name as it appears on your Social Security card, along with your Social Security number.
Step 4: Pick your schools - Put in all of your desired schools, including your safety school. You can put in up to ten schools, and there's no extra cost, so there's no reason not to include all of them.
Step 5: Determine your dependency status - If your parents are helping you pay for college, make sure they help you with this section. It has to do with your taxes and your eligibility, so take your time.
Step 6: Provide your parents' financial information - If you're a dependent of your parents, you'll need information about their income. Don't estimate - this section and all others needs to be exact.
Step 7: Provide your financial information - Again, this needs to be exact. If you're having trouble with finding the right information, there's the IRS data retrieval tool, which can help.
Step 8: Double-check your information - A zero in the wrong place can lead to missing out on thousands of dollars in aid!
Step 9: Sign the form - Using your FSA ID, you'll be able to electronically sign the form. If you're having trouble, you can also print it out, physically sign it, and mail it in, but this will delay the return of your SAR and shouldn't be done at the last minute.
Step 10: Watch for your Student Aid Report (SAR) and consider your options - You should expect the SAR sometime between three business days and two weeks later (or three weeks if you've done the whole process via paper mail).

Different Types of Student Loans and Financial Aid

After you fill out your FAFSA, student loan option will begin to be presented to you. Here are some different things you might see in your results and what they mean:

Grants vs. Loans

Grants don't require repayment; loans do. It's pretty easy to see why so many students would rather have grants. They can also be referred to as scholarships. Take some time to look up and apply for scholarships before or after you fill out the FAFSA.

You may also qualify for a federal Pell Grant; these are awarded to undergrads based on financial need.

Private vs. Federal Loans

This is another easy one! Federal loans are funded by the federal government, and private loans are funded by a lender such as a credit union, bank, state agency, or school. For federal loans, the interest rate is both low and fixed; that's not normally the case for private loans. Also, for some private loans, interest may even start accruing while you're still in school. Definitely look at private loans closely before applying.

Federal Perkins vs. Stafford Loans

The Federal Perkins Loan Program is a very low-interest loan program that's for students with exceptional need. The school serves as the lender. The limit is $5,500 per year, and the term is typically 10 years.

The William D. Ford Federal Direct Loan Program offers direct loans also known as Stafford loans, for which the U.S. Department of Education is the lender. The limit is between $5,500 and $12,500 per year, and the terms, interest, grace period rules, and other factors depend on whether your Stafford loan is subsidized or unsubsidized.

Direct Subsidized vs. Direct Unsubsidized Loans

Direct subsidized loans are Stafford loans that have been subsidized (just like it sounds) by the federal government. This means that the U.S. Department of Education pays the interest while you're in school, during the grace period of six months after you graduate, and during periods of deferment.

Direct unsubsidized loans are Stafford loans that don't get federal help, so you'll need to pay interest while you're at school, during grace periods, and during deferment periods. On the up side, though, these loans aren't based on financial need, and pretty much everyone can get them.

Other Types of Loans and Grants

Usually, a student who's demonstrated high financial need in their FAFSA will have a mix of grants, a federal Perkins loan, and a direct subsidized Stafford loan, with private and unsubsidized Stafford loans filling in the gaps. But there are also other forms of help:

Direct PLUS Loans - PLUS loans are either used by graduate students or parents of undergraduate students to help pay off debts (but the parent is responsible and can't transfer responsibility to the child).
Direct Consolidation Loans - If you have trouble paying back your loans, you may want to consolidate your loans into one payment.
Teacher Education Assistance for College and Higher Education (TEACH) Grant - If you plan to be a teacher in a high-need, low-income area, you may qualify for this type of aid.

Other Important Stuff to Know About the FAFSA

If you find yourself saying, "It's too much money; what do I do?" then note that once you receive the information back, you usually won't have to sign a Master Promissory Note (MPN) immediately. Take some time to consider your financial options, apply for a few more scholarships, map your next few financial years using some handy calculators and tools, and even consider adding more colleges to your list. There are a lot of ways to pay for college and a lot of strategies for bringing down costs.

Adding More Colleges

Let's say that once your top-choice school, backup school, and safety school all look at the data from your FAFSA, loans and other aid won't be enough for you to feasibly go to college. Don't stress! You can go back in and make FAFSA corrections to add schools that you may have not even considered. Smaller liberal arts colleges may give you more help, and you can always consider state schools, which have cheaper tuition and sometimes their own state funds for college aid as well.

FAFSA Appeals

In special circumstances, if you did not see enough help in your SAR to go to school, you may be able to do a FAFSA appeal. Here are those circumstances:

Your parents divorced
You've lost your job or lost some other major income
Your parent or spouse has died
You've experienced unexpected medical expenses

The FAFSA and Student Debt

Here are some surprising statistics about student debt and how FAFSA fits into the mix.

Financial Aid Calculators and Tools

If you've got your information and are trying to fully understand it, use some calculators to figure out what your monthly payment is going to be like after college. (We like the visualized calculator by The New York Times!)

Other Forms of Financial Help

Remember: You can always apply for more scholarships to get grant money that doesn't need to be paid back!

As far as the incidental costs of college, there are other things you can do to help lighten the load. You can save on textbooks by buying used or online. Many colleges charge astronomical prices for textbooks which can cost students thousands of dollars each year. You can save hundreds of dollars each semester by buying textbooks used or online. Thriftbooks has thousands of used textbooks discounted up to 75% off the original purchase price. Thriftbooks coupons can help students save up to 15% off textbooks every semester.

You can live off-campus to avoid the rising costs of dormitory living. If you need to buy furniture for your new apartment Overstock offers huge discounts on great brands for furniture and appliances. If you are interested in furnishing your apartment or dorm room make sure to use a verified Overstock coupons. You can save up to an additional 30% off on their already discounted prices.

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