• Michael Schreiber

Why FAFSA & Do We Even Qualify?



At Aevitas Wealth Management, we work to help you through all stages of life. If you have a child attending college next year, read on to learn why you should complete the Free Application for Federal Student Aid (FAFSA).


It is especially important to apply early for financial aid this year because many families have suffered economically during the coronavirus pandemic with job losses and salary reductions, and may have to take extra steps to qualify for maximum help. This means completing the FAFSA as soon as you can. Financial information from the 2019 tax year will be used to determine your need, but our office can help gather any additional information from 2020 that may be needed.


There is no need to panic if completing the FAFSA is on your task list - we can guide you through the process. Whether your child is a newborn or a senior in high school, Aevitas will advise you and design a personalized plan to pay for college. Please contact us to help and educate you on the process of college planning.


There is no need to panic if completing the FAFSA is on your task list - we can guide you through the process.


What is the FAFSA


The FAFSA (Free Application for Federal Student Aid) for the 2021-2022 year opens on October 1, 2020. It is a good idea to file the FAFSA as early as possible in the fall because some aid programs operate on a first-come, first-served basis. Typically, first-year students have earlier deadlines than returning students. Colleges have their own deadlines for filing the FAFSA, generally in the spring. Check with your child's college for exact timetables. The FAFSA is a prerequisite for federal student loans, grants, and work-study. In addition, colleges typically require the FAFSA before distributing their own need-based aid and, in some cases, merit-based aid. Students must submit the FAFSA every year to be eligible for financial aid (along with any other college-specific financial aid form that may be required, such as the CSS Profile).


Should I file the FAFSA even if my child is unlikely to qualify for aid?


Yes! Even if you don't expect your child to qualify for need-based aid, there may be two reasons to submit the FAFSA. First, colleges typically require the FAFSA when distributing their need-based aid and, in many cases, merit-based aid. So filing it can give your child the broadest opportunity to be eligible for college-based aid.


Second, all students attending college at least half-time are eligible for a federal unsubsidized Direct Loan each year, regardless of financial need. ("Unsubsidized" means the borrower, rather than the federal government, pays the interest that accrues during school and during the grace period and any deferment periods after graduation.) If you want your child to be eligible for this federal loan, you need to submit the FAFSA. And don't worry, your child won't be locked in to taking out the loan. If you submit the FAFSA and then decide you don't need or want the federal unsubsidized loan, your child can decline the loan through his or her college financial aid portal before starting the new school year.


How does the FAFSA calculate financial need?


The FAFSA looks at a family's income, assets, and household information to calculate its EFC, or expected family contribution. The EFC is the amount of money a family is deemed able to pay (afford) for college. All financial aid packages are built around this number.


When quantifying your income, the FAFSA uses information in your tax return from two years prior. This year is often referred to as the "base year" or the "prior-prior year." For example, the 2021-2022 FAFSA will use income information in your 2019 tax return, so 2019 would be the base year or prior-prior year.


When quantifying your assets, the FAFSA uses the current value of your assets. Some assets are not counted and do not need to be listed on the FAFSA: home equity in a primary residence, retirement accounts (e.g., 401k, IRA), annuities, and cash value life insurance. Student assets are weighted more heavily than parent assets — students must contribute 20% of their assets vs. 5.6% for parents.


Your income, assets, and household information are run through a formula to arrive at your EFC. Your EFC remains constant, no matter which college your child attends. The difference between your EFC and a college's cost of attendance equals your child's financial need. Your child's financial need will be different at every school.


Once your EFC is calculated, the financial aid administrator at your child's school will attempt to craft an aid package to meet your child's financial need by offering a combination of loans, grants, scholarships, and/or work-study. Keep in mind that colleges are not obligated to meet 100% of your child's financial need.


How do I submit the FAFSA?


The fastest and easiest way to submit the FAFSA is online at fafsa.ed.gov. To do so, you and your child will each need to obtain an FSA ID, which you can also do online by following the instructions. (Once you have an FSA ID, you can use the same one each year.) There is no cost to submit the FAFSA.


Before filling out the form, you might want to gather financial papers and account records. In most cases, the FAFSA can import information from your tax return directly into the form using its built-in IRS Data Retrieval Tool, saving you time and reducing the chance for mistakes.

Before filling out the form, you might want to gather financial papers and account records.


Click here to download our FAFSA Prep List.

After your FAFSA is processed, you will receive a Student Aid Report with your EFC, which is typically designated like this: "EFC36000" (translation: your EFC is $36,000). If you submit the FAFSA online, you will receive your report immediately via email; if you submit a paper FAFSA, your report will take longer to arrive by mail. Any college you list on the FAFSA will also get a copy of the report.


Next Steps


Contact Aevitas Wealth Management to discuss creating a customized and achievable plan to pay for your child's education. We will talk with you about estimating costs, how much to save, 529s, scholarships, grants, loans, and so much more.


Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020

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