The fall is here, which means it is also FAFSA time for college. Unlike Halloween, this should not be a scary time. The best tip we can give families is to get organized before they begin this process. Just relax; PayForED has compiled a list for families to review when filling out the FAFSA and hopefully make the process easier!
Completing the FAFSA is an important step in the college funding process, and we believe that every student should complete the FAFSA for a variety of reasons. The FAFSA submission generates your Expected Family Contribution or EFC. (Under FAFSA Simplification the EFC will now be called Student Aid Index or SAI). This is an important number in the financial aid process and packaging. The colleges determine your financial need by subtracting the Cost of Attendance (COA) by your EFC/SAI.
PayForED has a suite of comprehensive student loan solutions to help you plan your child’s educational future. To help you better understand completing the FAFSA, we have created a series of steps that will help you navigate the FAFSA submission.
FSA ID is Needed when Completing the FAFSA
The first step in completing the FAFSA is creating the FSA ID. This User ID and password are used to sign various federal documents and give you access to some of the federal loan systems. For most students, both the student and one of the parents will need to create their own FSA ID. It is linked to the social security system and will need to be validated before you can use it to sign your FAFSA. It usually takes a few days before it is formally approved, depending on the time of the year.
If you are an independent student, only the student needs an FSA ID. Here is a list of the most common independent types:
- Age – 24 or older
- Students with dependent children supporting themselves
- Have an undergraduate degree
- Some foster children and wards of the court
- Some emancipated minor
- Homeless or self-supported
Timing of Submitting the FAFSA
As stated above, the FAFSA or Free Application for Federal Student Aid is the form that generates the EFC. Families also need to complete the FAFSA to qualify for federal financial aid and many state aid programs. The FAFSA electronic form is available on October 1st for the upcoming college school year of 2023-2024.
Many families believe that the FAFSA should be completed as soon as possible. In the past few years, there have been a few issues or bugs that occurred at the initial stages of the FAFSA submission process. Due to past history, by waiting a few days, you may avoid some system frustration, and it will have little to no effect on your financial award.
As part of our newsletter list, we issue alerts if we identify any significant issues.
The FAFSA needs to be submitted each year for each student. Some colleges require additional financial aid information such as the CSS Profile or their own supplement forms. For newly entering college students, getting the form in early is beneficial. For returning students, April is the recommended time frame, if not before, based on the college’s deadline.
What to Gather
Let’s get organized! Completing the FAFSA will require both student’s and parent’s information. The two most critical tax documents are the 1040 tax form and W2 salary information. Getting all of this organized now will make the FAFSA completion process much easier when it is time to complete the form. You will need the following information:
- Name, address, and date of birth (DOB is often misreported, check input)
- Social security number for both Student and Parent(s) if filing as a dependent student
- Federal tax information or tax returns, including IRS W-2 information for the student (and spouse if you are married) and for parents if you are a dependent student. Forms needed: IRS, 1040
- Foreign tax return and/or Tax return for Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, the Marshall Islands, the Federated States of Micronesia, or Palau
- Records of untaxed income, such as child support received, interest income
- Length of current state residence
- College list with city and state (especially true for colleges with multiple campuses)
- Parents current marital status
- Student’s high school name and completion date
- Student’s current academic position
- The education level of the parents
- Cash, savings and checking accounts balances, investments for both student and parent
- Real estate value (not the primary residence) and business and farm assets for the student and parents if she/he is a dependent student. (Family-owned businesses and farms will be included in the asset number under FAFSA Simplification)
- Student’s Driver’s License number
- FSA IDs for student and one parent
An important note with regards to your income and assets. The income and taxes are reported based on the taxes filed for 2022 for FAFSA filed on October 1, 2023. If there is a significant change in your income, you should contact the schools and explain the change. Assets are reported as of the day of FAFSA submission. This reporting difference is an important item to realize and is confusing.
Entering Your College List when completing the FAFSA
The FAFSA allows you to input ten colleges at a time. If you have more than ten colleges, you will need to go back and enter the remaining colleges. You will need to wait until the initial FAFSA submission has been processed. FAFSA Processing will generally take 1 – 3 days, depending on the time of year.
Once the original FAFSA is processed, then the student can enter the remaining colleges.
It is recommended that you have a campus location since some colleges have multiple locations. You want to make sure it goes to the correct college. On the other hand, some colleges have centralized the financial aid process, and only one campus will be listed, and your college application needs to indicate the campus.
DRT links FAFSA to IRS
As we stated earlier, the income records for the FAFSA are based on the tax year prior to the academic year. For the 2023-2024 FAFSA submission, their 2021 tax information is used.
The colleges verify the FAFSA information through a process called Data Retrieval Tool or DRT. This FAFSA interface is with the IRS. The IRS Data Retrieval Tool (DRT) is available to students and parents who have submitted their income tax with the IRS. This tool transfers the tax return information directly onto the FAFSA form. To import this information, the tax information needs to match the input exactly. The most common issues are middle initials and abbreviations such as St. for Street.
DRT availability is also vital for people who have filed extensions. The DRT system will not be available for approximately 14 days after the taxes have been filed electronically. If the taxes were a paper submission, it will be much longer. Some of the more complicated tax returns cannot be imported. If you have filed an amended return or are on a payment plan, the DRT system is not available to you.
To access the DRT, a family will need to enter the FAFSA system and go to the tax section of the FAFSA. At that point, the family can access the IRS and transfer the data.
An important note regarding DRT. It is now a blind submission for personal identity security. For the first-time FAFSA filers, you may want to manually input the numbers and submit your FAFSA. The manual FAFSA submission will generate your Student Aid Report or SAR. On the SAR is your Expected Family Contribution or EFC. For some people, the EFC can be surprisingly high. By submitting it manually first, you can check your EFC by reviewing the numbers. If you use the DRT system initially, this option is not available.
You will need to go back and submit your FAFSA with the DRT, but at least you can formally estimate your EFC number. The DRT program also provides the colleges with verification that the numbers submitted reflect your submitted IRS information. The colleges need the DRT flag to be set for audit reviews.
Signing the FAFSA
The FSA ID is needed to sign the FAFSA. It is your electronic signature. For the dependent student, both the student and one parent will need to sign the FAFSA. The independent student will only need their FSA ID to sign. You need to realize this is a legal document and should reflect the information correctly at the time of signature.
Divorce and Separated Parents
As you can see, the FAFSA process is highly dependent on the IRS system. If the parents of the filing student are divorced or separated, then the parent who is submitting the FAFSA should be the person who claims the child on their taxes. Many divorced and separated families overlook or do not properly plan for the Data Retrieval Tool process.
On another note, parents who are divorced or separated need to have separate mailing addresses for this to work. Living in the same location will be considered a household, and both incomes will be included. If the submitting parent has remarried, then the new household will be used, and biology is overridden.
These rules may be changed starting for school year 2024-25 under FAFSA Simplification.
The FAFSA process needs to be completed each year if you want to qualify for federal financial aid or Direct Student Loans. With each submission, a Student Aid Report or SAR will be generated, confirming the changes. As stated above, I feel every family should complete the FAFSA.
As a help in the financial aid process, PayForED has the student loan solution, College Cost Analyzer. This easy-to-use student loan software can help families generate their EFC calculation, calculates a four-year estimate of college expenses, and helps families understand their debt structure. A family student loan debt structure is becoming more important. It determines the borrower’s repayment and forgiveness options.