The new Free Application for Federal Student Aid (FAFSA) is now available. The sooner families file, the better!
Filling out the FAFSA opens the door for students to get a piece of the roughly $120 billion available from federal grants, loans and work-study programs. The documents are also used to determine eligibility for state financial aid and money offered directly from the school.
A good portion of financial aid is awarded on a first-come, first-served basis, or from programs with limited funds. Although the FAFSA period for the 2020-21 academic year runs through June 2021, the earlier families fill out the FAFSA, the better the chance to be in line for that aid, experts say.
Plus, there's no need to wait for a 2019 tax return before filing the FAFSA since the 2020-2021 FAFSA is based on a household’s latest federal income tax return from 2018.
The U.S. Department of Education has taken steps to update the online version of the FAFSA app that was launched in 2018. Experts encourage parents to complete the FAFSA online for the fastest results. Online submissions are received immediately, while mailed-in forms can take several weeks to arrive and process.
Having a 529 plan can affect a financial award package, but the impact may vary based on who actually owns the plan.
- If a 529 plan is owned by a dependent student or a dependent student’s custodial parent, it is reported as a parent asset on the FAFSA.
- If a 529 plan is owned by an independent student, it is reported as a student asset on the FAFSA.
- If a 529 plan is owned by a grandparent, a noncustodial parent or anybody else other than the student or a dependent student’s custodial parent, it is not reported as an asset on the FAFSA, instead it is treated as unearned income and reported on the FAFSA the year after it is distributed for qualified higher education expenses for the benefit of the student. Related: Can I Combine a 529 Plan with Financial Aid?
To get started, students will need their Social Security number, federal income tax information (or their parents'), investment and bank records, and a federal student aid ID that can be obtained from the FAFSA website.
For tips on completing the FAFSA, visit the Federal Student Aid website.