FAFSA: How to Make College Affordable

Feeling like deciphering the Free Application for Federal Student Aid (FAFSA) is like trying to understand ancient hieroglyphics? You’re not alone. It’s a common sentiment among parents and students alike, who often find themselves lost in a sea of confusing terms and complex calculations. But fear not, dear reader! We are your Rosetta Stone, your secret decoder ring, your friendly neighborhood superhero ready to rescue you from the clutches of FAFSA confusion.

FAFSA: The Golden Ticket to College Funding

Every college-bound person and their parents need to know how the Free Application for Federal Student Aid (FAFSA) process works. Some may dismiss the idea of applying for financial aid for college because they think they make too much money to qualify. But regardless of their family earnings, they may be eligible for some form of financial assistance, including federal, state, and school-based aid as well as merit-based scholarships.

In fact, it makes sense for almost all families with a college-bound kid to fill out the FAFSA. The primary purpose of the FAFSA is to determine how much financial aid a student qualifies for, including both need-based and non-need-based aid.

The Secret Language of Financial Aid

To determine a family’s financial need, the FAFSA asks a series of questions about the parents’ and student’s income and assets as well as other factors, such as how many children there are in the family. It then comes up with a Student Aid Index (SAI).

The confusingly named Expected Family Contribution (EFC) was renamed the Student Aid Index (SAI) for the 2024–2025 school year forward to clarify its meaning. It does not indicate how much the student must pay the college. It is used by the school to calculate how much student aid the applicant is eligible to receive.

The FAFSA Formula

In addition to changing the name, the transition to SAI will also change the formula a bit. Parental income was once divided if they had more than one child in college at one time. Now, each child’s SAI will use the same amount of parental income information, whether they are supporting multiple children in college or not.

The FAFSA is the official form that students or their families use to apply for financial assistance for college from the federal government. States, individual colleges and universities, and private scholarship programs rely on the information provided in the application as well.

What Counts and What Doesn’t

In terms of assets, the FAFSA assumes that 20% of a student’s assets and 5.64% of the parents’ assets should be available for spending in any one college year. Those assets include bank accounts and investments but exclude the value of retirement accounts, life insurance policies, and annuities. Any equity in the family home is also excluded.

The information you supply on the FAFSA determines whether you qualify for need-based aid, non-need-based aid, or some combination of the two.

Grants, Loans, and Work-Study

Grants are the most attractive type of financial aid because they do not need to be repaid. Pell Grants, the main federal grants for college, are intended for students with ‘exceptional financial need.’ They are primarily awarded to undergraduates, but some teacher certification programs are also eligible.

These grants also do not need to be repaid, but they are only available at certain schools. The amounts range between $100 and $4,000 per year. As with Pell Grants, these supplemental grants are meant for students with few other financial resources.

Subsidized and Unsubsidized Loans

These loans are subsidized by the government, which means that will not be required to pay interest on them while you are in school and for a grace period of six months after you graduate. Loan amounts that can be subsidized range from $3,500 to $12,500 per year, depending on your year in school and whether you are considered a dependent or independent student as defined by the office of Federal Student Aid. These subsidized loans are not available for graduate study.

The federal work-study program makes paid part-time jobs available through participating colleges and universities. Both undergraduate and graduate students may be eligible.

Federal vs. Private Loans

Federal loans, whether subsidized or unsubsidized, tend to be less costly than private loans and have more flexible repayment options. Unsubsidized loans are similar to their subsidized counterparts with one big exception: The government doesn’t pay the loan interest while the student is in school or during a six-month grace period afterward. If students or their parents don’t pay the interest during this time period, it will be added to the principal of the loan.

Schools can offer these loans as part of a financial aid package regardless of a family’s financial situation. Dependent students are eligible for a maximum of $31,000 in subsidized and unsubsidized loans over their undergraduate years unless their parents are ineligible for federal PLUS loans, in which case the limit may be higher.

The FAFSA Deadline: Don’t Miss Out!

To be considered for federal student aid for the 2023–2024 award year, you needed to complete a FAFSA form by June 30, 2024. Each state also has its own deadline. The FAFSA for the 2024–2025 school year will be available Dec. 2023.

Most families—regardless of how much they earn or have accumulated in assets—will find it useful to fill out FAFSA. If it turns out that they are ineligible for free money in the form of grants or scholarships, they are still likely to be eligible for non-need-based aid in the form of direct unsubsidized loans from the federal government. Federal student loans typically have more favorable terms than loans from private lenders and offer a variety of flexible repayment options.

The FAFSA Adventure Awaits

So there you have it. The FAFSA isn’t as scary as it seems. In fact, it’s your golden ticket to making college affordable. So don’t let the fear of the unknown hold you back. Dive in, fill out that form, and unlock the treasure trove of financial aid that awaits. Remember, the only thing standing between you and your dream college is a form. And as we’ve seen, that form is more friend than foe. So go forth, conquer the FAFSA, and let the adventure begin!