The FAFSA, the Free Application for Federal Student Aid, opened on October 1st. Should you file a FAFSA? Families who need financial aid for college should file the online form because nearly every college in the United States requires it. The FAFSA is used to determine a family’s Expected Family Contribution (EFC), which is then used to determine the family’s financial need at a particular college. All colleges are required to use the FAFSA to give out federal financial aid such as Pell Grants and Federal Direct Loans. Most states also require the FAFSA for students who hope to receive state financial aid, and many colleges use it to give out their own institutional aid as well. Families with financial need should definitely file the FAFSA.
What about families who will not be eligible for need-based financial aid? Should they file the FAFSA? Sometimes.
If the family would like the student to take out a Federal Direct Loan, they will have to fill out a FAFSA. Federal loans are the best kind of student loan because they come with the possibility of income-based repayment, fixed interest rates, and a longer time to default (9 months). The interest rates are better on the Federal Direct Loans available to undergraduates as opposed to the loans available to graduate students. Families who believe their student may go on to graduate school or professional school after the undergraduate degree sometimes ask their student to take out the Federal Direct Loans at the undergraduate level and then save their money for the graduate education.
Families need to file the FAFSA for the student to be eligible for federal work study as well. However, most federal work study will go to students who have financial need anyway, so families without need should probably not file the FAFSA for that reason alone. There are also other jobs on campus such as research positions which may be a better bet in helping students prepare for their future careers than federal work study jobs.
If a family without financial need files a FAFSA and then later has an emergency situation arise which would make them eligible for need-based financial aid (job loss, loss of home due to flooding, for example), college financial aid offices will be able to respond to their new financial situation more quickly.
And the downsides for a family without financial need filing the FAFSA? The family may be unnecessarily putting its financial information at risk. Last spring there was a data breach in which the personal information of thousands of families who filed the FAFSA was compromised. Because the FAFSA asks for information about both the income and assets of a family, higher-income families may have more to lose if their financial information is stolen. Families without financial need should weigh the potential benefits of filing the FAFSA against the risks.