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Rangely Garcia / Money

More than $120 billion in federal aid is given out each year to help families pay for college. Your only shot at a piece of that pie is by filling out the FAFSA — the Free Application for Federal Student Aid.

Each October, the application opens up, and anxiety from college-bound students and their parents ensues. After all, the form has a reputation for being long, confusing and, frankly, disappointing. (Families often disagree with the federal government’s assessment of how much they can afford.)

But it’s a vital step in the college application process nonetheless, and some basic preparation can go a long way in avoiding headaches. Here are 9 FAFSA mistakes to watch out for.

1. Not Filing the FAFSA

As many as one in seven students eligible for financial aid fail to fill out the FAFSA, according to the Brookings Institute. That can cost them real money. Of the students who did not file the FAFSA in 2016, more than a third — or 2 million students — would have qualified for the federal Pell Grant, according to Mark Kantrowitz, publisher of Savingforcollege.com. That’s free money, worth up to $6,345 this year, for students from low- and moderate-income backgrounds.

The lesson here is every student even thinking about enrolling in college should fill out the FAFSA.

One of the most common reasons for not filing is that students and their parents believe they won’t qualify for need-based aid because they make too much money. However, financial aid formulas are complex, and there are other factors that influence aid. For example, Kantrowitz points out that two children in college at the same time has a big impact on aid eligibility. “When you go from one child in college to two children in college, it's like dividing the parent income in half,” he says.

Plus, there are large assets, such as home equity, retirement savings and the net worth of any small businesses that are ignored in the federal financial aid formula, according to Kantrowitz.

Some students believe the FAFSA is too complicated or takes too much time. And while it can be confusing if you have an unusual financial situation, the federal government has made several updates in recent years to simplify the process, including allowing users to skip questions that don’t pertain to them and to automatically upload their earnings from tax documents. According to the Department of Education, most people now take less than 30 minutes to complete the entire application.

Finally, even if you don’t qualify for a penny of need-based federal aid, a completed FAFSA could also be required for merit-based scholarships.

2. Misunderstanding What the FAFSA Is — and What It Could Provide

The FAFSA is an important part of getting assistance paying for college, but for many students, it still isn’t clear what the exactly the form provides.

Once you fill out the FAFSA, you'll receive a Student Aid Report that includes your family’s EFC, or expected family contribution. This is the amount that the government calculates your family can afford, and the number affects the financial aid you will receive. Your financial need is a simple calculation: the cost of attendance (COA) minus the EFC.

So, for example, if your cost of attendance is $16,000 and your EFC is $12,000, your financial need is $4,000.

A previous federal study found that 28% of students who did not fill out the FAFSA skipped it because they didn’t want to borrow student loans. But loans are only one part of what you can access through FAFSA.

Here’s what filling out the form could mean for you:

Grants: Grants are money from federal or state governments to help pay for college. They are awarded to students with financial need. The most common grants include the federal Pell Grant and the TEACH Grant. In most cases, this is free money for college that you don’t have to repay. You’d only need to give back these awards if you failed to meet a specific eligibility requirement or your financial need or enrollment status changed.

Work-study: After you fill out the FAFSA, you may be eligible to participate in work-study if you demonstrate financial need. One in every 10 first year, full-time students are eligible for work-study. This program allows students to apply for part-time jobs, usually on-campus. You can use the money you earn to pay for whatever you’d like. Besides the financial benefit, several studies have suggested that working less than 20 hours per week improves academic performance.

Scholarships: Many students don’t realize that skipping the FAFSA could also mean losing out on scholarships offered by colleges and community-based organizations. “Some colleges require applicants for their merit scholarships to file the FAFSA to ensure that they also get any need-based aid to which they are entitled,” Kantrowitz says.

Federal Student Loans: If you have exhausted all of your other resources and have decided that borrowing student loans is the right move for you, you can’t receive federal loans without completing the FAFSA. Federal loans offer better benefits and are often more affordable than private student loans. Some federal loans are subsidized, which means the government pays the interest while you’re in school. Other federal loan benefits include income-driven repayment plans, Public Service Loan Forgiveness, easy payment deferments (for unemployment or economic hardship), and discharge for disability or death. There are few requirements to qualify for federal loans, meaning the vast majority of students and parents can borrow, regardless of their income level.

3. Not Preparing in Advance

Save time and avoid errors be doing prep work before you get started. First, get an FSA ID at fsaid.ed.gov. This is an electronic signature that is used to sign the FAFSA online, which both the student and a parent each need.

Gather the documents you’ll need. This includes:

  • Social Security Card both student and parents (or Alien registration number)
  • Driver’s license number (if you have one)
  • Cash, savings, and checking account balances
  • Copy of tax returns, W-2s and 1099s from 2018 (if you won't be using the IRS Data Retrieval Tool)
  • Investments (other than your residence)
  • Records of untaxed income, including child support and interest income

If you don’t have all of the information required, you can start the FAFSA and save it, so it’ll save you time once you’re ready.

It also helps to create a list of the colleges to which you will be applying and their financial aid deadlines.

4. Not Filing as Early as Possible

Don’t make the mistake of waiting to complete the FAFSA. A lot of financial aid offered through states and colleges is first-come, first-serve. The earlier you fill out the FAFSA, the better your odds of receiving grants, scholarships and the option for work-study.

“Deadlines are the most important item in financial aid,” says Jodi Okun, founder of College Financial Aid Advisors. “Students and parents need to get the forms in early to get in line for financial aid.”

That’s especially important this year, Okun says, because the pandemic recession means more families are likely to apply for aid. She recommends checking each college’s financial aid website and submitting your application by the priority deadlines.

The federal deadline to file the FAFSA is June 30th by 11:59 pm Central Time. However, many states and colleges have priority deadlines to be considered for aid that are much earlier. Here is a list of state deadlines. For college deadlines, contact your financial aid department directly.

Besides being an early bird for the FAFSA, if you qualify for work-study in your award letter, you should apply for jobs as soon as possible. “Most colleges award more work study than they have jobs available. To be sure you get a work-study job, you need to be among the first to apply,” Kantrowitz says.

5. Using the Wrong Website

Some students do not use the correct website for filling out the FAFSA, often led astray by scam websites or paid services that will help you file. Remember, the FAFSA is free and does not require a payment. Be sure the website is the official website: fafsa.gov.

6. Making Sloppy Errors

Answering a question wrong, not electrically signing the form and unintentionally swapping parent information for student information are just a few of the common mistakes people make when filling out the FAFSA.

If a student answers a question incorrectly, they can correct the error on the FAFSA web site. If they don't, their FAFSA may be selected for verification, an audit-like process where they have to submit additional documentation to prove the answers they originally provided are accurate. The process can be lengthy, and if a student does not complete verification, they will not get any aid. Colleges are required to resolve conflicting information before financial aid can be disbursed.

So, be sure to double check numbers. Review your Student Air Report to confirm there aren’t errors. Kantrowitz says if your Expected Family Contribution (EFC) is unreasonably high, it can be a sign of an error.

7. Not Filing a Financial Aid Appeal If Your Finances Have Changed

With the coronavirus pandemic, millions of Americans are unemployed or furloughed. If a student or parent has lost a job or experienced a loss in income, it’s possible to appeal for more financial aid. This is especially relevant since the FAFSA uses income information from two years ago, so you’ll have to fill out the form with income information that may not reflect 2020’s turbulence. Aside from a drop in income, other common reasons people appeal for more financial aid include high unreimbursed medical expenses and high dependent costs for a special needs child or elderly parent, says Kantrowitz, who’s also the author of How to Appeal for More College Financial Aid and also wrote an example of an appeal letter.

You’ll have to file an appeal with every college you’re applying to. Most will require some form of documentation or evidence. Contact your financial aid department to learn exactly what you'll need.

8. Misusing Student Loans

After you’ve filed your FAFSA and received a financial aid award from the college you plan to attend, you’ll be able to take out federal loans. But just because you’re approved for loans doesn’t mean you have to take them or take the full amount. Often, students simply take whatever they’re offered in loans, without calculating how much they’ll actually need.

“Students sometimes treat student loans as free money. They borrow to the limit and use some of the money to pay for things they don't need,” Kantrowitz says. “Every dollar you borrow will cost about two dollars by the time you repay the debt. So, before you spend student loan money on anything, ask yourself if you'd still buy it at twice the price.”

9. Only Filing the FAFSA Once

Filing the FAFSA isn’t a one and done type thing. Even if your information hasn’t changed, you need to submit a FAFSA form each year you are attending college.

The good news is it takes less time to renew than it does to complete it your first time. Once you log in with your FSA ID username and password, if you’re eligible for a FAFSA renewal, there will be pre-filled information you can confirm or update.

While there are mistakes to be made when completing the FAFSA, focus and preparation can help reduce these. Take your time, understand how the FAFSA works, and read the questions carefully.

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