What is the FAFSA, and how does it affect financial aid?

When a student comes close to earning their high school diploma, there’s a lot on their plate. They need to search for the best colleges to apply to, explore majors they like, and figure out how to pay for college. The latter can be confusing sometimes and often requires the student to complete a special form, the Free Application for Federal Student Aid (FAFSA).

Haven’t heard of the FAFSA? 

That’s OK. Despite its long name, the FAFSA is relatively straightforward to complete once you understand the documents you need and how it works. We answer the question, “What is FAFSA?” and more below.

What is the FAFSA?

The Free Application for Federal Student Aid (FAFSA) is a form completed by college students who want to be considered for federal financial aid, such as grants, student loans, and work-study programs. In some states and at some colleges, the FAFSA also helps determine eligibility for state financial aid and school-level financial aid, such as scholarships and grants.

You can complete the FAFSA 100% online via the U.S. Department of Education’s website. Even though the student is the one applying for financial aid, dependent students will need to include both their own and their parents’ information on the form.

What is on the FAFSA form?

The FAFSA application asks for a range of personal, educational, familial, and financial information to help determine your eligibility for student aid. It uses this information to determine how much of the cost of college you’re responsible for and where the federal government can help with grants, work-study programs, and federal student loans. 

Here’s some of the information you’ll need to fill out the FAFSA form:

• Student’s name

• Student’s Social Security number

• Student’s driver’s license number (if applicable)

• Parents’ Social Security numbers

• Alien registration number (for non-citizens)

• Records of untaxed income, such as child support and veteran's noneducation benefits

• Personal financial information from the student and the student’s parents (if the student is a dependent), such as cash on hand, savings and checking account balances, and investments

• Up to 10 schools the student is interested in attending

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You’ll also need to include tax returns for the student, the student’s spouse (if applicable), and the student’s parents (if the student is a dependent). You can automatically transfer tax information using the IRS Data Retrieval Tool (DRT) on the FAFSA application.

Before filling out the FAFSA form, create a Federal Student Aid ID (FSA ID). When you create an FSA ID, you also create an FSA account, which enables you to complete the FAFSA, sign your master promissory note, apply for repayment plans, and more. All the applicant needs to create an FSA ID and FSA account is their Social Security number and a mobile phone number or email address.

If a dependent student includes a parent's information on the FAFSA, that parent will also need to create an FSA ID.

When is the FAFSA due?

You cannot fill out the FAFSA any time you’d like. The FAFSA has an opening and closing date that aligns with most college admissions schedules. So, when is the FAFSA due? For the 2023-2024 school year, the FAFSA opened on October 1, 2022, and the FAFSA deadline is 11:59 p.m. Central Time on June 30, 2024.

The dates you can complete the FAFSA are the same every year, meaning the FAFSA opens on October 1 and closes on June 30 annually. But remember, each school can set its own FAFSA due date, so keep this in mind when choosing the right time to apply. Also consider your state deadline and priority deadlines.

What if I make a mistake on my FAFSA or something changes?

Mistakes happen, and life can change suddenly. If you made a mistake on your FAFSA or your situation changed and it may impact your eligibility for financial aid, you can make changes and updates to your FAFSA. 

To change your FAFSA, head to FAFSA.gov, then log in with your FSA ID. You can then click “Make Corrections,” create a save key (the key the FAFSA prompts you to create to save and access your application later), update your info, and submit it.

Remember, there is also a deadline for making changes to the FAFSA. For the 2023-2024 school year, that federal deadline is 11:59 p.m. Central Time on September 14, 2024. The federal FAFSA deadline for changes will be September 14 every new school year.

One exception to the change process is if you used the wrong Social Security number on the FAFSA. In this case, the Department of Education recommends submitting a new FAFSA with the right number.

Do I need a new FAFSA every year?

You must complete a FAFSA every academic year you plan to apply for financial aid. The Department of Education needs you to reapply yearly because things can change. With a fresh FAFSA, you know you’re getting the correct amount of federal financial aid to help pay for school.

Renewing your FAFSA is pretty simple. Just head over to FAFSA.gov and log in with your FSA ID. Click “Renew my FAFSA Form,” update any changed information, and enter any requested financial info. Then, sign and submit the FAFSA.

How does the FAFSA help determine financial aid eligibility?

Filling out the FAFSA doesn’t guarantee you’ll get financial aid. Instead, it is there to determine how much — if any — aid you qualify for. 

The FAFSA looks at the cost of attendance (COA) at the school you plan to attend and your expected family contribution (EFC). The financial aid staff then subtracts the EFC from the COA to determine how much need-based aid the student qualifies for. 

To determine any non-need-based aid the student qualifies for, the staff subtracts any financial aid you’ve been awarded from the COA.

All those strange calculations and acronyms may have you scratching your head. Let’s take a closer look at how each step works.

What is COA?

COA includes the college costs the student will incur for the entire academic year. If the student plans to attend school at least half-time, the COA calculation will include:

• Tuition and all fees

• Room and board or living costs off-campus

• Books, supplies, transportation, loan fees, and other expenses

• Child or dependent care costs

• Disability-related expenses

• Study-abroad program fees

The COA will come from your college, so you don’t need to dig up all these fees.

What is EFC?

EFC is basically how much the federal government believes your family can contribute toward your college education.

They use the financial information on your FAFSA to make this calculation. They also consider family size and the number of family members attending college.

There are three formulas for calculating the exact EFC:

• Formula A is for dependent students.

• Formula B is for independent students without dependents other than a spouse.

• Formula C is for independent students with dependents other than a spouse.

There are also simplified versions of each formula that include no assets in the calculations, but only certain students will qualify for the simplified formula.

What is need-based financial aid?

Need-based financial aid is only available if you have a financial need based on a simple calculation: COA - EFC = financial need. So, if your COA was $5,000 and the EFC was $1,000, you would have a $4,000 financial need.

This means you would qualify for up to $4,000 in need-based financial aid, which includes:

• Pell Grant

• Direct Subsidized Loan

• Federal work-study program

• Federal Supplemental Educational Opportunity Grant (FSEOG)

Need-based financial aid generally has more favorable terms than non-need-based. For example, a Pell Federal Grant doesn’t require repayment in most cases, and with Direct Subsidized Loans, the Department of Education pays the interest while you're in school at least half-time and in other circumstances.

What is non-need-based financial aid?

Non-need-based financial aid is the COA minus all financial aid offers you’ve received, including merit-based aid, public and private scholarships, state grants, federal student loans, and more. 

So, if your COA was $5,000, and you were awarded $4,000 in need-based financial aid and a $500 scholarship from your state, you’d be eligible for up to $500 in non-need-based financial aid.

Some types of aid that fall in the non-need-based category include:

• Direct Unsubsidized Loans

• Direct PLUS Loans

• Teacher Education Access for College and Higher Education (TEACH) Grants

Non-need-based financial aid may cost more in the long run. For example, the student is responsible for all the interest charges on Direct Unsubsidized Loans. 

However, federal non-need-based loans are still typically better than private student loans, which often have higher interest rates and may not offer forbearance or income-based repayment plans if you hit a financial rough patch.

Financially prepare for college with the FAFSA and Greenlight

With a firm grip on what the FAFSA is and how it affects financial aid, students can work toward saving money for their college years. The more money they have saved before school, the fewer loans they need to repay after graduation.

The Greenlight app can help teens prepare financially too. It builds financial literacy and good money habits in college that will be useful during college and beyond. Plus, special features like Savings Goals and 1% Cash Back to Savings* will make it easier to start saving now.

Download the Greenlight app today and start enjoying all its great features. 

*Greenlight + Invest families can earn monthly rewards of 1% per annum, Greenlight Core and Greenlight Select families can earn 2% per annum, Greenlight Max families can earn 3% per annum, and Greenlight Infinity families can earn 5% per annum on an average daily savings balance of up to $5,000 per family. Only Greenlight Max and Infinity families can earn 1% cash back on spending monthly. To qualify, the Primary Account must be in Good Standing and have a verified ACH funding account. See Greenlight Terms of Service for details. Subject to change at any time.