Every current and future college student knows the importance of filling out the Free Application for Federal Student Aid (FAFSA). However, not every applicant understands the intricacies of how their federal aid award is calculated, and how they can get more money from their application.
So, how can you get more money from FAFSA? In this article, we’ll discuss how your financial aid award is calculated and the top 5 ways to get more money from FAFSA.
How is FAFSA Calculated and Awarded?
To get more money from FAFSA, it’s essential to review how the Free Application for Federal Student Aid works.
When you fill out the FAFSA, you’ll list the colleges where you want the application to be sent. Those schools will then look at the Expected Family Contribution (EFC) calculated by the FAFSA.
Next, each school will subtract your EFC from the school’s Cost of Attendance (COA) to determine your financial need. Your financial need determines how much need-based financial aid you’re eligible to receive.
Need-based aid includes:
- Federal Pell Grants
- Federal Supplemental Educational Opportunity Grants
- Direct Subsidized Loans
- Federal Perkins Loans (new loans no longer being disbursed)
- Federal Work-Study
The schools will then subtract the amount of need-based aid (and scholarships/non-federal grants) you’ve received from your financial need. The resulting number is the amount of non-need-based financial aid you’re eligible to receive.
Non-need-based aid includes:
- Direct Unsubsidized Loans
- Federal PLUS Loans
- Teacher Education Access for College and Higher Education (TEACH) Grants
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How to Get More Money from FAFSA
Getting more money from FAFSA comes down to the following 5 points:
1. File Your FAFSA Early
You may already know that it’s a good idea to file your FAFSA early, but you may not know how much of a difference it can make.
How early should you file your FAFSA? In short, the earlier you file your FAFSA, the better. Students who file the FAFSA in the first three months after it opens receive about twice as much financial aid, on average, as those who file later.
This is because filing early helps ensure that you meet state and college deadlines, which can vary, in addition to the federal deadline.
FAFSA Start Date and Deadline
The opening date for FAFSA submission was traditionally January 1st. However, the date moved up three months with the 2017-2018 school year.
Now, the earliest you can submit your FAFSA for the upcoming school year is October 1st. (The FAFSA for the 2020-2021 school year will open October 1, 2019.)
The federal deadline for FAFSA is June 30th. However, state and college deadlines may be earlier.
Just as FAFSA is used to grant aid from the federal government and your college, it is also used to calculate how much aid you can receive from your state’s education department.
Although the federal FAFSA deadline is June 30th, state financial aid is more limited, so it’s often awarded on a first-come, first-served basis. Many states set their financial aid deadlines well ahead of the federal deadline, cutting off submissions in February or March.
If you miss your state’s FAFSA deadline, you’ll likely end up receiving less financial aid. Check your state’s FAFSA deadline here.
Like states, colleges may have their own deadlines that are well ahead of the federal one. This can help the college’s financial aid office process aid applications more effectively.
If you submit your FAFSA after the college deadline passes, you could receive less financial aid than you would otherwise. To make sure you meet or beat the deadline, check your colleges’ financial aid web pages or contact the financial aid office.
2. File Your Taxes Correctly and On Time
FAFSA uses tax information from a previous year, known as the “base year”, to determine your financial aid eligibility. For the 2020-2021 FAFSA, the base year is the 2018 tax year.
If you want to get the full amount you’re eligible for based on your Estimated Family Contribution, make sure you get your taxes taken care of on time.
If you’re a dependent student, this factor will apply more to your parents. However, if you earned more than $10,000 in the previous tax year, you need to file income taxes of your own, even if you only worked part-time.
When you go to file your FAFSA, you’ll be asked to provide the relevant tax and income documents—yours and/or your parent or parents’. This includes forms like:
- 1040, 1040A, or 1040EZ forms
- W-2 forms
- Bank statements
- Mortgage statements
- Interest statements
Make sure you and your parents have these forms at the ready so you don’t leave anything out of the FAFSA. Doing so may result in your missing an important deadline.
Additionally, thorough tax information can result in a higher FAFSA award by accurately demonstrating your financial need.
3. Update and Correct Your FAFSA
Your FAFSA award isn’t final until the school year has started and you’ve signed your name to accept the award. The financial aid system has a built-in appeal process that allows applicants to submit supplemental materials and addendums.
This process is in place because the federal government understands how quickly an individual or family’s financial status can change.
If you’ve been affected by a natural disaster, for example, you have a high chance of gaining more financial aid than you did initially. If you’ve experienced events that would significantly decrease your Expected Family Contribution, make sure you submit FAFSA corrections to reflect that fact.
4. Minimize Your Income and Assets
As mentioned above, FAFSA uses tax information from the base year to determine your Estimated Family Contribution and need-based aid eligibility. The formula takes both assets and income into account, but income is weighted much more heavily.
If your family has any moveable assets, investments, or sources of income, it may be beneficial to make some adjustments during the base year.
Income is the primary factor that determines your Estimated Family Contribution. While you don’t want to take a pay cut at work to qualify for more aid, you can make strategic choices when it comes to other sources of income.
For example, avoid taking profits on stocks, bonds, and mutual funds if possible. If you must sell an investment, make sure to offset your gains with any losses you had throughout the year.
Similarly, you can avoid making withdrawals from retirement plans to minimize your adjusted gross income (AGI) for the base year. These withdrawals count towards your income—even tax-free Roth IRA contributions.
Assets count less than income in the EFC calculation, but reducing reportable assets can still affect need-based aid eligibility.
You can reduce financial assets by paying down credit cards, auto loans, and other consumer debt. Paying off your debt not only makes good sense financially, but it can also paint a more accurate picture of your Estimated Family Contribution.
Transferring financial assets to your outstanding debts will minimize the amount of money you have sitting around that isn’t actually available for educational costs.
5. Strategically Save for College
Generally speaking, the more money you have available already to you to pay for college, the less assistance you’re eligible to receive through financial aid.
That raises the question—does saving for college mean you’ll get less financial aid? If so, does that mean you should avoid saving for college altogether if you want to get the most from FAFSA?
Saving for college is always a good idea since it can mean far less stress (and debt) overall. Luckily—as discussed above—assets don’t impact Estimated Family Contribution as much as income does, and that includes student savings account.
However, you can make saving for college even more beneficial by going about it strategically.
Save in the Parent’s Name
One way to save more strategically for college is by investing in an account that belongs to the parent or parents, rather than to the student. The student can be named as a beneficiary on the account, but should not be the owner.
Assets in the student’s name count much more heavily against financial aid than those in a parent’s name. Student-owned financial assets count against financial aid at a rate 20%, while those in a parent’s name are assessed at only about 5% – 6%.
College Savings Account
One exception to the rule stated above is designated 529 college savings accounts. A 529 college savings account is calculated as a parent asset, whether it’s in the parent’s name or the student’s name.
However, a college savings account that is owned by another relative, like a grandparent, can get complicated. It won’t count as an asset in your FAFSA, but withdrawals from the account will be counted as untaxed income on the following year’s FAFSA.
Using a designated 529 college savings account can also lower your tax bill. Any earnings on the investment aren’t taxed as long as they go towards college expenses, including tuition, room and board, fees, and books.
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What is the Most You Can Get from FAFSA?
If you apply each of the 5 ways to get more money from FAFSA described above, what is the maximum amount of money you can get from FAFSA?
The maximum financial aid award you can receive depends on whether you’re a dependent or independent student, whether you’re an undergraduate or graduate student, and which year of school you’re entering.
Pell Grants are free money provided by the government, and you don’t have to repay them.
Pell Grants are only available to undergraduate students, and the maximum Pell Grant amount you can receive depends on the Cost of Attendance at your school.
Pell Grant limits change each year. For the 2019-2020 school year, the maximum Pell Grant award is $6,195.
If you qualify for a Pell Grant, you will receive one. The government gives each college enough money every year to disburse Pell Grants to all of its eligible students.
Federal Supplemental Educational Opportunity Grant
Undergraduates who demonstrate exceptional financial need may qualify for another $4,000 in addition to their Pell Grant award with an FSEOG.
However, FSEOGs are not guaranteed based on eligibility like Pell Grants. Even if you demonstrate exceptional financial need, your school may not receive enough funds to cover your FSEOG.
Direct Subsidized Loans
If grants don’t cover the cost of school, you may be offered a subsidized loan. Unlike grants, a loan is money that you do have to repay.
However, the government generally pays the interest on a Direct Subsidized Loan while you are in school and during a six-month grace period after you graduate. This makes Direct Subsidized Loans preferable to unsubsidized loans and private loans.
The amount you can borrow with a Direct Subsidized Loan is determined by your college but limited by the federal government.
The annual maximum Direct Subsidized Loan amount ranges from $3,500 (for first-year undergraduate, dependent students) to $5,500 (for third-year and beyond undergraduate students).
After you qualify for need-based aid, including Pell Grants, FSEOG, and Direct Subsidized Loans, you may be eligible for additional funds in the form of non-need-based aid.
As a first-year undergraduate, dependent student, you can borrow up to $5,500 total in federal loans. (As noted above, no more than $3,500 of that can be in the form of subsidized loans.)
As an independent first-year student, you can borrow a maximum of $9,500 in federal student loans.
Federal loans—even those that are unsubsidized—are still preferable in most cases to private loans in your first years of college. If you need more money after grants, scholarships, and need-based financial aid, you can borrow up to the yearly limit or your remaining financial need—whichever is lower.
Non-need-based federal student aid also includes Direct PLUS Loans and TEACH Grants.
Getting More Money from FAFSA: Bottom Line
If you’re wondering how to get more money from FAFSA, keep in mind the five strategies detailed above. In addition to getting the most money possible from your FAFSA, remember to make the most of non-federal opportunities to pay for college.
While you can take advantage of the above ways to get more financial aid, it’s also beneficial to apply for as many scholarships as you can, save up for college, and consider other sources like private student loans if federal aid doesn’t cover the full cost of school.
Compare the Best Student Loan Refinance Rates
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)College Ave Refi Education loans are not currently available to residents of Maine. (2)The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation. (3)$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 9/24/2019. Variable interest rates may increase after consummation. (4)This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 9/24/2020. Variable interest rates may increase after consummation.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.