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 compiled a list of the 10 most common FAFSA errors and issues.
One of the most important items this year is the next phase of FAFSA Simplification. For the Class of 2023, there are no significant changes in the FAFSA calculation and financial aid process. The big changes will occur next year with the full implementation. This year’s class will need to understand these changes described in our FAFSA Simplification article.
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:
1. Create Your FSA ID and Password First
To complete and sign the FAFSA, 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. The applying student should be listed on their tax return if they are a dependent child. 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.
2. 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 cannot see the imported numbers or update any of the imported data. 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 get an accurate 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. Starting in October 2023, FAFSA will be automatic due to the FAFSA Simplification process.
3. Using the Right Tax Year
The FAFSA process uses a term called Prior Prior. This means the FAFSA information will use the taxes that you should have in hand starting on October 1 of that year. The 2023-24 FAFSA submission will use 2021 tax data. 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. If you had a change in your marital status or income, you will need to submit an appeal to each college with an explanation.
4. Retirement Account Rollovers
Due to how the IRS system recognizes retirement rollovers, this amount is commonly recognized as income when you use the DRT system. This error has been a recurring issue for many FAFSA filers and could significantly impact your financial aid positioning. Any money 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’s financial aid office to resolve this. If you did have a rollover in the tax year 2021, we recommend an initial manual submission and a DRT submission to confirm the EFC numbers are the same.
5. 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.
6. Leaving Blank Spaces
It is recommended that you do not leave any fields blank. Put 0 in any fields that are not applicable.
7. 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 include retirement contributions that match the FAFSA tax year, child support, disability income, and worker compensation.
8. Reporting of Step-parents Information
For divorced parents, if one or both have remarried, the FAFSA requires the household’s income, not biology. In this case, the FAFSA submitting parent will need to include the new spouse’s income and assets in completing the FAFSA.
9. Knowing Your State’s FAFSA Deadline
Most states use the FAFSA for their state’s financial aid granting process. Each state’s deadline is different. Many returning college students often overlook their state’s submission date.
10. Connecting to DRT
You will need to elect to leave the FAFSA system and move to the DRT system. The FAFSA system will tell you that you are leaving. To connect to the DRT system correctly, the information on your 1040 needs to match DRT/ FAFSA input exactly. For example, if your 1040 has your middle name or has an abbreviation, you need to enter the 1040 information as it appears. This will be true for other areas such as address also.
Summary of the Most Common FAFSA Errors and Issues
We recommend 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 it is overwhelming, but if you take your time and avoid the FAFSA mistakes listed above, it can be very 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 an email 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 will not be visible, and only the school financial aid officer can change it.
The FAFSA and financial aid process is another step in making the right college decision. PayForED’s 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.
