If you find the FAFSA a little confusing the first time you file it, you’re not alone. In fact, according to a recent Sallie Mae study, 1 in 5 families find the FAFSA challenging to complete.1
But since the FAFSA determines what financial aid your family is eligible for, it’s very important that you fill everything out accurately. You don’t want to have to go back after the fact and update any errors—doing so could delay or otherwise impact your financial aid awards from colleges.
When you’re filling out the FAFSA, be sure to avoid the following common mistakes.
If your non-working income already shows up as a part of adjusted gross income, you don’t need to list it twice. Untaxed income and adjusted gross income are added together to arrive at total income. If you list non-working income in the untaxed income category, you will increase your EFC (expected family contribution) number, which could in turn decrease your family’s eligibility for financial aid programs.
The equity of your home and the value of any retirement plan should never be included as an asset. If you own a second home or other real estate, however, you do have to include it as part of the total net worth of your investments—only the equity of the home you live in is exempt from being as asset on the FAFSA.
For the current FAFSA, college savings accounts should be listed as a parent asset. Listing college savings as a parent asset will decrease your EFC.
When listing members in a household, anyone who lives in the parents’ household and receives more than 50 percent support from them, such as grandparents or older siblings, should be included.
While this seems like an obvious mistake to avoid, it’s easy to glance through the form and accidentally write numbers in the wrong place. Be sure to double-check your FAFSA to make sure the numbers are in the correct places.
A student’s parents may be his or her biological parents, stepparents, or adoptive parents. Grandparents and legal guardians should not be included as parents.
Filing the FAFSA for a divorced family can be a little confusing. Only the parent and/or stepparent with whom the student resides most of the time (i.e., for more than six out of the last twelve months) should be included. The other parent’s financial information should not be provided, and that parent should not file a separate FAFSA, even if he or she intends to contribute to the student’s education financially. Divorce decrees or tax return exemptions are not involved in this decision.
In a two-parent household, whether it’s two biological parents or a biological parent and a stepparent, both parents’ financial information should be included in the FAFSA.
If you plan to file your federal income taxes after mid-February, you should complete your FAFSA as soon as possible after January 1, using your best possible estimates. Then, after you’ve completed your taxes, you can update your Student Aid Report (SAR) with your actual tax information. You don’t want to wait too long to file your FAFSA. If you plan to file your taxes before mid-February, you should file your taxes first and then complete the FAFSA.
About the Author
Frank Palmasani has helped families work through the college financial aid system for more than 30 years. He is committed to helping all families create a plan for finding the right colleges, without taking on mountains of debt.
1. “How America Pays for College 2012.” Sallie Mae. July 2012.