Sometimes minor mistakes can cost you big time.
If you incorrectly fill out certain questions on the FAFSA (Free Application for Federal Student Aid)—delaying the process of determining your eligibility for federal financial aid—you could lose out on precious funds.
“Many colleges offer financial aid on a first-come, first-served basis,” says Ben Kohl, former president of the Kansas Association of Student Financial Aid Administrators. “But while families sometimes hurry to get in the FAFSA as quickly as they possibly can, it’s better to be accurate than it is to be fast.”
Here’s why: if you make errors, you’ll get put into the FAFSA’s verification process, which is a time-consuming review to check that your information is both accurate and consistent with what your parents filed on their taxes. So how do you get it right on the first filing? Take note of what these financial aid experts have to say about how to complete the trickiest questions and avoid the snare of the verification process.
“Applying is faster and easier if you transfer your tax return information into the FAFSA with the direct data exchange.”
When you reach this point on the application, you’ll want to transfer your Federal Tax Information (FTI) using the direct data exchange with the IRS. Don’t bother with manual data entry when you don’t have to. “I have seen data-entry errors on every line of the FAFSA at some point,” says Kohl. That is to say, whenever you have to input data, there’s a risk of typos. To lower that risk, the FAFSA online form has a direct data exchange with the IRS (which replaces the IRS Data Retrieval Tool) that seamlessly pulls numbers from your parents’ tax returns into the application, reducing the chances you’ll make a mistake. Bonus: The direct data exchange will also save you quite a bit of time.
“What was your parents’ adjusted gross income for the previous year?”
Getting this number wrong—and especially overstating it—can affect how much money you’re eligible for, says Kohl. If you are unable to use the direct data exchange and are manually entering this information, triple-check your parents’ tax returns. Make sure not to add extra zeros by mistake—it happens often and can really cost you.
“You can add up to 20 colleges to your FAFSA.”
When first filling out the FAFSA, you can select a maximum of 20 schools. But you can apply for federal aid at additional schools after you’ve completed and submitted your FAFSA listing your first 20 choices. “You need to do it after you receive your FAFSA Submission Summary, formally known as the Student Aid Report (SAR), which indicates that your FAFSA has been filed appropriately,” says Kohl. At that point, you can go back in, delete those first 20 schools (which have already received your FAFSA information) and enter new ones so they too will receive your details.
“As of today, what is the net worth of your parents’ investments, including real estate?”
“Families often get confused when their only investments are through their retirement accounts,” says Blaine Blontz, founder of Financial Aid Coach, an independent financial aid consulting company. “Also confusing the situation is the fact that the other most popular financial aid form, the CSS Profile® through College Board, asks about retirement plans.” However, parents are not required to report their retirement assets on the FAFSA. “They need to include distributions from retirement accounts that take place in the base tax year, but they shouldn’t report the amount in their retirement account as a parent investment,” says Blontz.
“What is the net worth of your [the student’s] investments?”
If your parents have a 529 college savings plan for you, don’t enter it here. “Sometimes the 529 funds are either left off entirely or put in the wrong section, most often as a student asset or investment,” says Blontz. “A 529 plan should be considered as a parent investment, or it will increase the family’s Student Aid Index [SAI].” This information will be entered in a later question if you are listed as a dependent.
“As of today, what is the net worth of your parents’ current businesses and/or investment farms?”
“Families are often confused about whether or not they should include assets from a family-run small business,” says Blontz. Families must report the net worth of any small business or family farm (regardless of size) as an asset. There is an exception to reporting assets if a family’s annual gross income is less than $60,000.
Still have questions? FAFSA’s online help section addresses a number of other common queries, and you can use this guide to get started. Completing the application correctly can seem like a daunting task, but stay the course—the money you could receive for college will be well worth the effort.
Should you have questions about reporting your assets on the FAFSA, consult a financial advisor.
FAFSA® is a registered trademark of the US Department of Education and is not affiliated with Discover® Student Loans.
CSS Profile® is a trademark registered by the College Board, which is not affiliated with, and does not endorse, this site.
