FAFSA Mistakes That Can Negatively Impact Your Financial Aid

ElitePersonalFinance
Last Update: January 12, 2021 Financial News

It’s less than 48 hours until the official application for college financial aid.

October 1st is the first day for college students to start applying for grants and other financial aid for the academic year 2020 – 2021 through the Free Application for Federal Student Aid (FAFSA).

According to the 2017-2018 academic year, over 18 million applicants filled out the FAFSA forms in the U.S. Department of Education report.

Even as the official applications for aid launch, students are encouraged to ensure that their application details are accurate. They must also have them submitted as early as possible to avoid missing the priority deadline.

Here are some of the costly mistakes that students must avoid.

Failing to Apply

One mistake that students and their families can make is failing to apply for financial aid via the FAFSA. Most families have a diminishing, erroneously thought that they don’t qualify for the grant since they fall into a particular income bracket.

That’s not true whatsoever as each family’s financial position is judged from an individual’s perspective. Parents and children must apply for this financial aid regardless of the social and economic statuses.

During the 2017-2018 academic year, for example, the standard amount of aid extended for each full-time equivalent student was $14,796, according to a report by the College Board. Grant aid accounted for $8,974 of the said amount.

In 2017, high school graduates missed out on $2.3 billion in federal grants for failing to fill out the FAFSA at all.

Playing a Waiting Game on Paperwork

If you’re a student and search for state financial aid, you must file the FAFSA on time.

Why?

It’s because the state aid is finite. There are more than a dozen states — Alaska, Illinois, Indiana, Kentucky, Nevada, North Carolina, North Dakota, Oklahoma, Oregon, South Carolina, Tennessee, Utah, Vermont, and Washington where the aid is issued on a first-come, first-served basis until the entire allocation is disbursed.

As mentioned above, the states have a fixed allocation of the only available funds until it runs out. Therefore, it means that if you’re late on your FAFSA applications, you may have to settle for loans in place of grants.

Making Data Errors

Well, this is another mistake that happens in most cases through assumptions or unawareness. There are, however, some errors that are common whenever applicants submit their application for financial aid. Here are some of these errors. You should avoid them at all costs each time you fill out the FAFSA.

Adding retirement assets in calculations. Money that you hold in a 401(k) or a personal retirement account are not assets on the FAFSA. Annuities, Insurance policies, and home equity too are not part of the consideration.
Confusing the students’ and parents’ sections. Students may find themselves putting down their information in the FAFSA section meant for the parents and vice versa. Such information is easily ignored, yet it can cause one to miss financial aid.

Using a nickname in place of your legal name. Most students have nicknames, which becomes part of them because they use them primarily in everything. FAFSA requires that applicants use their legal names and not nicknames while applying for financial grants.

You can minimize or eliminate the application mistakes by using the IRS data retrieval tool. This tool automatically populates your FAFSA with all your federal tax return information.

Failing to fill out the FAFSA because you think your family income is high.

Most students are not aware that filing for FAFSA also puts you in the running for aid that is not necessarily tied to the family income. A good number of colleges give out some non-financial need-based aid, As much as the percentage of students differ from school to school. Five schools-Rhodes College, Franklin W. Olin College of Engineering, and the New England Conservatory of Music, in the academic year 2016-2017 gave out non-need-based scholarships or grants to about 50% of their students. That is, according to USA Today.

Note: There are individual schools where families with annual incomes near $200,000 still received need-based aid.

Failing to file the special circumstances form in case income drops.

FAFSA’s financial need is calculated on income from the previous tax year. If you are a self-sponsored student, you may be on a lower salary because you returned to school a year before and quit your job. As a dependent student, you could be with a parent whose income dropped since the year before. If either is the case, ask to fill out a special circumstance form from the office of your financial aid. If you do that, your financial aid package will be determined using your existing financial circumstances. Ensure that you fill out the form as soon as possible so you won’t miss out on any aid given on a first-come, first-served rule.

Conclusion

Most students have failed to get the necessary financial aid because of the FAFSA mistakes they could have otherwise avoided. The above discussed are some of the mistakes you must avoid so that they have no impact on your chances of getting financial aid.

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