Common myths about federal student aid
The 2018-19 Free Application for Federal Student Aid (FAFSA) opened on October 1.
Our financial education partner, Everfi, recently published an article on common FAFSA myths. We’ve repurposed it here to help guide you through the process and relieve any anxiety you may have about filling out your application.
This year, more than 13 million students will receive over $120 billion in federal grants, loans, and work-study funds. Unfortunately, many students and families will fail to maximize on their potential benefit from the student-aid system. The high school class of 2017, for example, left some $2.3 billion in free college aid on the table – translating to $3,583 per person – with 36 percent failing to fill out the FASFA form at all. The reasons for this trend vary based on socio-economic status – middle-class families often think they make too much money or have too many assets to qualify for student aid, and lower-income families tend not to apply due to a lack of understanding.
The good news is that knowledge is power. Here are 11 common FAFSA myths and the realities to know about.
1. MYTH: My parents earn too much for me to qualify for aid?
REALITY: There is no income limit to qualify for student aid. The formula for determining aid is not based on income alone but also takes into account factors such as assets, the cost of your school’s tuition, the cost of your family’s home or business, and other tuition they may be paying.
2. MYTH: The FAFSA is just for federal aid
REALITY: When you fill out the FAFSA application, you’re automatically applying for aid from your state and, in some cases, from your school. In fact, some schools require you to fill out the FASFA first in order to be considered for scholarships and grants. Which is all the more reason to apply – you never know what you’re going to get!
3. MYTH: The FAFSA form is really hard to fill out
REALITY: It’s straightforward, easy, and, most importantly, free. Just go to fafsa.gov, follow the directions on the screen, and you’re good to go. You can also fill out a PDF or return a printed form in the mail if you prefer.
4. MYTH: My grades aren’t good enough to qualify for aid
REALITY: Most federal aid programs don’t take grades into account. As long as you meet the basic eligibility criteria – and maintain satisfactory academic progress once in college – you can qualify for and maintain your financial aid. Where grades will help is in getting accepted into the school of your choice and qualifying for academic scholarships… so keep studying!
5. MYTH: I didn’t qualify for financial aid last year, so I’m not going to bother this year
REALITY: It’s important to fill out the FAFSA form every year you’re in college. Not only do most financial-aid offices require it, but your eligibility for financial aid also varies from year to year based on your family’s economic status and the number of family members enrolled in higher education. Plus, there may be new grants or scholarships out there, and the factors used to calculate aid may have changed. Fortunately, it’s even easier the second time: all you have to do is fill out a renewal FASFA, which pre-fills your information from last year. All you need to do is change what’s new.
6. MYTH: I’m going to graduate school, so this doesn’t apply to me
REALITY: The FAFSA can be used for college, a career school, graduate or professional school. By filling it out, graduate students may qualify for aid from a variety of programs, including the Ford Federal Direct Loan program, TEACH grants, the Federal Work Study (FWS) program, and Pell grants. The primary difference between the FAFSA process for undergraduate and graduate students is that the latter are generally considered independent students and, thus, are not required to provide parental information.
7. MYTH: The income and savings from my job will disqualify me from receiving financial aid
REALITY: While it’s true that both your and your parents’ income and savings are calculated as part of the Expected Family Contribution (EFC) to your education costs, the good news is that the first $6,420 in annual student income is protected. Fifty percent of anything after that goes toward calculating the EFC, although federal and state tax allowances protect a bit more. In short, you’d have to earn a lot for your income to begin to affect the EFC any more than a little.
8. MYTH: My credit problems will disqualify me from qualifying for financial aid
REALITY: With the exception of Direct PLUS loans, you do not need to get a credit check to qualify for a federal student loan. This is one of several benefits provided by federal loans, including lower interest rates, the ability to have a portion of the loan forgiven by working in public service, and the ability to defer payments while in full-time education.
9. MYTH: I can’t apply for financial aid because my parents aren’t U.S. citizens
REALITY: The FAFSA form does not even ask about your parents’ citizenship status. If they don’t have Social Security numbers, they can enter 000-00-0000. For the record, your ethnicity and age are not considered in the eligibility requirements, either.
10. MYTH: Federal student aid is free money
REALITY: The only student-aid money that does not need to be repaid are grants. The other parts of your financial aid package will be made up of loans (money that must be repaid with interest) and work-study (a program where you earn money to contribute to school costs). This is important to consider, especially in the case of the student aid “refund” – extra money refunded to students once their aid package has covered school costs. However tempting it is to spend, that money is no different from the rest of your financial aid and, if part of your loan, will be added to the balance you owe!
11. MYTH: I can’t file my FAFSA until after I’ve applied to schools and filed my taxes
REALITY: When it comes to filling out your FAFSA, earlier is better, as some schools disburse financial aid on a first-come, first-served basis. So go ahead and add every school you’re interested in – you can edit or delete them later. As for the taxes, remember that FAFSA asks for the tax year two years prior to the start of the school year. So don’t wait!
(Article written by Torie Sullivan and published Oct. 8, 2018, by Everfi, a company that Arsenal Credit Union partners with on digital-based financial education at local high schools)