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5 FAFSA Myths Debunked

Jan. 21, 2016
Student Loans
5 FAFSA Myths Debunked
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It’s January, so FAFSA season has begun. If you (or your student) are planning to attend college in the 2016-17 school year, you need to fill out the Free Application for Federal Student Aid to be considered for loans, grants, work-study programs and some scholarships.

You should fill out the FAFSA as soon as possible — even before you know where you got accepted or decide which school to attend — because some colleges award aid on a first-come, first-served basis. But before you get started, here are five common FAFSA misconceptions set straight.

[Use NerdWallet’s free FAFSA Guide to help you through the process.]

Myth: Your family earns too much to be eligible for aid

Truth: Even if you don’t qualify for need-based aid, you may qualify for other types of aid.

If your family’s income is too high, you may not qualify for certain aid programs — namely, federal grants. But if you want to be considered for other aid, including work-study programs and federal student loans, you still need to fill out the FAFSA.

Plus, you won’t know what aid you’re eligible for until you apply. Dustin Smith, assistant director of financial aid at the University of San Francisco, encourages everyone to fill out the FAFSA regardless of their financial situation.

“There’s so much that goes into the (FAFSA) calculation,” Smith says. Factors include parents’ ages — the closer they are to retirement, the more aid their student is likely to get — and the number of siblings enrolled in college at once.

Myth: The FAFSA is only for federal aid

Truth: States, universities and some outside scholarship programs also use the FAFSA to determine aid.

In addition to federal grants, loans and work-study programs, you may be eligible for need-based and merit-based grants and scholarships from your state, college and private organizations. Although some require additional applications, the FAFSA is “the first step” for many of these non-federal aid programs, says Rich Nickel, president of College Success Arizona, an organization that offers scholarships and mentoring to low-income and first-generation college students.

Even some schools and groups that offer merit-based scholarships use the FAFSA to understand how their award fits into a student’s full financial aid package, Nickel says. Knowing the full picture allows the school or organization to allocate its scholarships efficiently and avoid awarding too much aid to one student.

Myth: You have to file 2015 taxes before you can file the FAFSA

Truth: You can fill out the FAFSA using your 2014 taxes to estimate your income.

You need to file the 2016-17 FAFSA based on 2015 taxes. But if you haven’t filed your taxes yet, you can use your 2014 return to estimate answers to FAFSA questions, including your adjusted gross income, income tax and net worth for 2015.

When you do file your 2015 taxes, go back and update your FAFSA. You can opt to use the IRS Data Retrieval Tool, which will populate the FAFSA based on your 2015 tax returns.

“Once you file your taxes, the use of that IRS retrieval tool is fairly seamless,” Nickel says.

Myth: You have to fill it out only once

Truth: You have to fill out the FAFSA for every year you want financial aid.

Filling out the FAFSA isn’t just a one-time event. You need to do it every year you want to be considered for financial aid.

Even if you filled it out previously and didn’t receive aid, it’s still worth filling out again — especially if your financial situation has changed, Smith says. For example, if your income is lower or you now have more than one student from the same household enrolled in college, you may qualify for more aid this year.

Myth: The FAFSA is long and confusing

Truth: It’s not as bad as you think it will be, provided that you’re prepared.

With its reputation of being a major headache, the FAFSA often causes stress for applicants, Nickel says. But he likens FAFSA anxiety to worrying about going to the dentist: It’s not as bad as you think it’s going to be.

“Wondering and worrying and fretting is actually a lot worse than doing the form,” he says.

If you’re prepared with documents — including your Social Security card, 2015 tax information (or 2014 information to use in making estimates), and your current bank statements — filling out the FAFSA can take just 30 minutes.

If you have questions about the application, NerdWallet’s FAFSA Guide can help you understand how to fill it out based on your family situation and immigration status. NerdWallet’s FAFSA Tutorial walks applicants through the process question by question.

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This article was written by NerdWallet and was originally published by USA Today College. 

Teddy Nykiel is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @teddynykiel.

Image via iStock.