Readers continually send us questions about how best to handle saving for and paying for higher education. This month we focus on the Free Application for Federal Student Aid, known as the Fafsa, as well as “529” accounts, the tax-advantaged savings vehicles that allow after-tax contributions to grow tax-free in mutual funds when used for qualified education expenses. We asked experts to help answer the questions.
What are the biggest mistakes people make when filling out a Fafsa? What tips should parents know about this application?
One common mistake is not filing the form at all, says Mike Brown, managing director of Nitro College, a student-loan and scholarship site. Families that earn significant income and have many assets might feel they won’t receive any assistance. But it’s worth trying, he says: “Many upper-middle-class families are eligible for some type of aid, and therefore need to file the Fafsa.”
Another error: not filing the form quickly enough. Money is often given out on a first-come, first-served basis, he says. So fill out the form as early as possible—it is now available on Oct. 1 instead of January—and repeat the process every year your student is in college. Otherwise, you won’t be eligible to receive aid such as Pell grants (if you qualify), which don’t need to be repaid, he says.
Prioritize speed over perfection when filing the form, which can be done either online or on paper.
“Don’t stress too much over making sure everything is perfect; you can file a correction if need be,” Mr. Brown says.
Contrary to popular misconception, Fafsa isn’t an entity that gives out student aid. The form itself is used to establish how much your family can afford to pay for your student to go to college. Once you submit the form, colleges will send you a letter detailing aid packages, which can include money from the school itself or from the government.
Don’t let the form intimidate you, Mr. Brown says. It’s relatively easy to fill out, and you won’t need to hire a professional to help. If you want a step-by-step guide, there are free resources available online, including from his firm.
Also note, Mr. Brown says, that when you and your child sit down to complete the Fafsa, you will have to share your salary.
“It can be an awkward and potentially eye-opening conversation, so be prepared,” he says.
Take this as an opportunity to discuss with your child how your family plans to pay for college. Discuss how much the family will contribute, whether your child can apply for grants or scholarships, and how much your child is prepared to pay every month in student-loan payments after graduation, he says.
Be aware the Fafsa recently changed some of its procedures. For this application season, families reported 2015 tax information, not 2016 data. The new “prior-prior-year” model has many benefits. One is that families no longer have to estimate their tax information and then go back and correct the form after their taxes are done, says Marcos Cordero, the chief executive of Gradvisor, which helps companies provide 529 plans as an employee benefit. The fact that the Fafsa is now available in October, meanwhile, means families can get financial-aid information further in advance of certain college-decision deadlines, he says.