‘Maximize that free money first.’ The best time to apply for financial aid for college is coming up

Whether it’s due to belt-tightening or the promise of federal student loan forgiveness, suddenly families are paying closer attention to financial aid for college.

Of those parents with college-bound students who didn’t plan on applying for federal aid, 58% have now changed their minds, according to a new report by Discover Student Loans.

“Given the uncertainties in the economy right now around inflation and fears of a recession, it’s understandable some families are feeling the impact of paying for college and reconsidering applying for federal aid,” said Rich Finn, vice president of Discover Student Loans.

That’s where the Free Application for Federal Student Aid comes in.

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With tuition on the rise, most families rely on a combination of resources to make college affordable. Income and savings cover more than half of college costs, free money from scholarships and grants accounts for roughly a quarter of the costs and student loans make up most of the rest, according to Sallie Mae’s annual “How America Pays for College” report. 

You want to maximize that free money first,” such as scholarships and grants, said Sallie Mae spokesman Rick Castellano, “before you borrow.

But students must fill out the FAFSA to access any assistance. For the 2023-2024 school year, the FAFSA filing season opens on Oct. 1 — and the sooner students file, the better.

The earlier families fill out the FAFSA, the better their chances are to receive aid, Castellano said, since some financial aid is awarded on a first-come, first-served basis, or from programs with limited funds.

“The FAFSA is the most important thing you can do to qualify for scholarships and grants,” Castellano said. “In the end, that’s free money that you don’t need to pay back and that should help make college affordable.”

Scholarships are a key source of funding, yet only 60% of families use them, according to the education lender.

About 6 in 10 who used scholarships got them directly from their student’s school. Those students received $6,335, on average.

The majority of families who didn’t use scholarships said it was because they never applied.

Last year, 70% of families completed the FAFSA, up slightly from 68% the year before, which was a record low, according to Sallie Mae. This year, as many as 72% may apply, Discover estimated.

“My hope, always, is that more families complete the FAFSA,” Castellano said.

Among those who don’t apply, the most common reason is because they thought their income was too high to qualify for aid, followed by feeling that the application was too complicated or they simply didn’t know about it, Sallie Mae found. 

In fact, “just about every family will qualify for some form of college aid,” Castellano said.

Many factors, not just income, go into determining how much aid students receive, including the total number of people in the household and the number of children in college, as well as other financial commitments such as a home equity loan or child support payments.

The application process itself is another hurdle, families say.

However, experts say you can complete the FAFSA form online at fafsa.gov or on the myStudentAid app in less than an hour, particularly if you have your paperwork, including W-2s and last year’s tax return, on hand. Sallie Mae also has a free online FAFSA tool to help families navigate the process.

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