The FAFSA completion season is in full swing for families. Each year, as families navigate this process there are always a few items that change or questions that need clarity. PayForED has put together a list of the 10 most common FAFSA errors and issues.
Simple mistakes can cause a family’s Expected Family Contribution (EFC) to be much higher and may disqualify the student for need-based financial aid. PayForED hopes to minimize these mistakes and reduce the stress during the college application and financial aid season. Our software provides additional transparency to the financial aid process so that families get answers to their college funding and student loan questions.
Here is a list of the 10 most common errors and issues to avoid:
Create Your FSA ID and Password First
To complete and sign the FAFSA both the student and one parent must have an FSA ID and Password. This should be done before starting the FAFSA. For divorced and separated families, the parent who will be submitting the FAFSA should be the one with the FSA ID and Password. Make sure the student uses a personal email and not their high school email since it will be needed in the future for FSA ID password recovery and resets.
First Time Filers Do Not Use Data Retrieval Tool (DRT) Initially
We recommend that first-time FAFSA filers complete the FAFSA manually and not use the DRT system to import their income and tax information. Once you use the DRT system you are unable to see the imported number or update any of the imported information. Only the college financial aid office can make changes and adjustments to the income sections of the FAFSA if you use DRT. By doing the FAFSA manually, you to get a true estimation of your EFC via the Student Aid Report. You then will need to go back and submit the FAFSA with DRT. With both the manual and DRT EFC you can confirm that the imported information was correct. The DRT system is the link between the FAFSA and the IRS.
Using the Right Tax Year
The FAFSA process uses a term called Prior Prior. This means the FAFSA tax information will use the taxes that you should have in hand starting on October 1 of that year. The 2022-23 FAFSA base year is 2020. This is the tax information that will be imported from the IRS using the DRT system. If you had a change in your marital status or income you will need to submit an appeal to each college with an explanation. If you have filed for a tax extension, the DRT system will not be available for 4 – 8 weeks depending on your method of tax submission.
Retirement Account Rollovers
Due to how the IRS system recognizes retirement rollovers, this amount is normally recognized as income when you use the DRT system. This has been a recurring issue for many FAFSA filers and could have a significant impact on your financial aid positioning. Any money that was rolled over from a 401k, 403b, 457 plan, or traditional IRA could be included as income on the FAFSA with the DRT import. You will need to contact each college financial aid office to get this resolved.
Asset Reporting for FAFSA
The assets that should be reported on the FAFSA are at the time of submission and not based on the tax year. The FAFSA should only include taxable saving and investment accounts, all children’s 529 plans, and business value if it is not your family-owned business. Items to exclude are retirement accounts, home equity, and family-owned business values. Some colleges have a secondary process that may ask for additional financial information.
Leaving Blank Spaces
It is recommended that you do not leave any fields blank. Put 0 in any fields that are not applicable.
Reporting Untaxed Income Items
In the years you are applying for financial aid some non-taxed items need to be included in the income numbers. These would include retirement contributions that match the FAFSA tax year, child support, disability income, and worker compensation as an example.
Reporting of Step-parents Information
For divorced parents, if one or both have remarried, the FAFSA requires the income of the household and not biology. In this case, the FAFSA submitting parent will need to include the new spouse’s income and assets in completing the FAFSA.
Knowing Your States FAFSA Deadline
Most states use the FAFSA for their states financial aid granting process. Each state’s deadline is different. This is often overlooked by returning college students.
Connecting to DRT
To connect to the DRT system correctly, the information on your 1040 needs to match DRT/ FAFSA input exactly. This is only once you elect to leave the FAFSA system and move to the DRT section of the FAFSA. The FAFSA system will tell you that you are leaving the FAFSA system and moving to the DRT section. As an example, if your 1040 has your middle name or has an abbreviation you need to enter the 1040 information exactly the same way appears on the form in the DRT section.
Summary of the Most Common FAFSA Errors and Issues
It is our recommendation that every college-bound student should complete the FAFSA. It tells the colleges your ability to pay and helps families structure the debt properly. The reputation of the FAFSA process is that is overwhelming but if you take your time and avoid the FAFSA mistakes listed above, it can be manageable.
Make sure you sign the FAFSA using the proper FSA ID and password. Once you complete the FAFSA you will receive a submission notification on the screen. You should save that. Within a few days, the student will receive notification that the FAFSA has been processed and their Student Aid Report(SAR) is available. The SAR will list all of the information that was submitted. Once you use the DRT process, the income and tax information will be starred out.
This is another step in making the right college decision. The PayForED suite of solutions helps students and parents make informed college decisions that are custom to you. Our College Cost Analyzer will help you compare your colleges’ side by side once you receive the acceptance letters and financial awards.