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Your Guide to Getting Through the FAFSA

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Your Guide to Getting Through the FAFSA

Don't think you can afford college? You're not alone. Roughly 85% of all first-year students are awarded college financial aid for their study at four-year institutions. But in order to get that help, you have to apply for financial aid through the U.S. Department of Education. Use this FAFSA guide to help you not only apply for aid but understand what your financial options are.

We're going to run down some basics, some terms, and the simple process of how to apply with the FAFSA. Application tips are good, but it's also very important that you understand what you'll see in return and what you'll be signing up for. Which loans will have federal help in terms of interest? Which type of student financial aid is preferred? We'll cover this and much more!

It's easy to get lost in the weeds with details on the form, so here's a basic rundown of what things mean as you come across the terms in your application:

Accreditation - This is an important question to ask: Is your college accredited? That means that it's met the academic standards of a peer-reviewing group. Contrary to what might seem logical, "regional" is often a better measure of accreditation than "national."
Consolidation - Sometimes, in order to pay loans back, it's useful to combine a few loans together into one payment.
Cost of Attendance (COA) - This is the total cost of going to your school, including fees, tuition, room, board, and allowances.
Default - It's pretty hard to get out of a loan, and defaulting doesn't mean you get to stop paying. It means you haven't made a payment in 270 days or more. It's a very bad thing. This often comes with legal consequences, and you usually still accrue interest during this time.
Deferment - If you feel like you can't make payments, you may be able to temporarily postpone them rather than defaulting. It depends on certain conditions and the loan itself. For instance, if you're out of a job, you can officially apply for a deferment so that your direct subsidized loans won't accrue interest. Other types of loans will likely accrue interest during that time, however.
Enrollment Status - This has to do with your credits and attendance every semester. Are you going to school full-time or part-time?
Expected Family Contribution (EFC) - Based on your parents' income and other data, the government creates a number that will help determine your eligibility for federal aid. You can find it on your SAR, or student aid report.
Federal Work-Study - Federal work-study is a unique program that's often somewhere between a loan and a job. It's funds the government provides for part-time employment at your school. You definitely should try to apply for job openings as early as possible!
Forbearance - If you can't make payments, you may qualify for a deferment or forbearance. With deferment, you may qualify for not having to pay interest for that period, depending on the type of loan. With a forbearance, you usually have to pay interest for that period. Sometimes, a forbearance merely lowers your monthly payments rather than skipping months entirely.
Forgiveness - In very rare cases, your student loans may be forgiven. (This may also be referred to as a "cancellation" or "discharge.") It only applies to a handful of situations, such as the Teacher Loan Forgiveness Program.
Grace Period - There is a small window of time after you graduate when you don't need to immediately start paying your loans. It's usually six to nine months long and allows you time to find a job. It also can take effect if you leave school or drop below half-time enrollment. That being said, you'll still have to pay interest for that period for most types of loans.
Graduation Rate - When you research colleges, it's important to look at the school's graduation rate. It's a measure of how many full-time, first-degree-seeking students graduate within 150% of the normal time it takes to complete the degree program. Online colleges typically have low graduation rates.
Grant - This is financial aid that you do not need to pay back!
Income-Driven Repayment (IDR) Plan - In the worst-case scenario, if you're making far less than you expected to with your new degree, you can file for a different repayment plan that's based on how much you make, which would lower your minimum payments but extend the life of your loan.
Interest Rate - Interest is the amount the bank can charge you for using their money, and the rate is the percentage at which it's calculated. A high interest rate means more money being charged. Student loan interest rates vary a great deal, from around 2.5% to as high as 15%, so it's definitely an important factor to consider when you're signing up for a loan!
Lender - This is the organization you'll be borrowing from, usually a bank, a credit union, or the school itself.
Master Promissory Note (MPN) - This is an important contract that you'll sign when you're ready to commit to the loans. Usually, before you sign, you'll need to complete entrance counseling, where you'll learn more about how these loans work.
Need-Based - Students with a high financial need might be awarded need-based grants or need-based loans.
Principal - The principal is the total sum of money borrowed. Interest is calculated using the principal balance. If your were to overpay, it's important to make sure that would lessen the principal of your loan.
Private Loan - This is a non-federal loan made by a different lender. They typically have higher interest rates and longer terms.
Satisfactory Academic Progress - Schools have standards in terms of their loan programs for the grades and progress you need to meet every year in order to get grants and loans. Each school has its own standards that you need to meet so you don't lose your financial aid.
Scholarship - This is money, usually awarded by a school or group, that usually doesn't need to be repaid.
Student Aid Report (SAR) - This is a summary of your completed FAFSA, which has important details like your expected family contribution (EFC).

Here's a quick rundown of what the process will be like:

Step 1: Get your FSA ID - Create a new FSA ID. You'll need your own email address, username, and password.
Step 2: Start the FAFSA - Go here to start filling out your forms. (Note that you won't be able to begin before October of the prior school year.)
Step 3: Enter in your basic information - Enter in your name as it appears on your Social Security card, along with your Social Security number.
Step 4: Pick your schools - Put in all of your desired schools, including your safety school. You can put in up to ten schools, and there's no extra cost, so there's no reason not to include all of them.
Step 5: Determine your dependency status - If your parents are helping you pay for college, make sure they help you with this section. It has to do with your taxes and your eligibility, so take your time.
Step 6: Provide your parents' financial information - If you're a dependent of your parents, you'll need information about their income. Don't estimate - this section and all others needs to be exact.
Step 7: Provide your financial information - Again, this needs to be exact. If you're having trouble with finding the right information, there's the IRS data retrieval tool, which can help.
Step 8: Double-check your information - A zero in the wrong place can lead to missing out on thousands of dollars in aid!
Step 9: Sign the form - Using your FSA ID, you'll be able to electronically sign the form. If you're having trouble, you can also print it out, physically sign it, and mail it in, but this will delay the return of your SAR and shouldn't be done at the last minute.
Step 10: Watch for your Student Aid Report (SAR) and consider your options - You should expect the SAR sometime between three business days and two weeks later (or three weeks if you've done the whole process via paper mail).

After you fill out your FAFSA, student loan option will begin to be presented to you. Here are some different things you might see in your results and what they mean:

If you find yourself saying, "It's too much money; what do I do?" then note that once you receive the information back, you usually won't have to sign a Master Promissory Note (MPN) immediately. Take some time to consider your financial options, apply for a few more scholarships, map your next few financial years using some handy calculators and tools, and even consider adding more colleges to your list. There are a lot of ways to pay for college and a lot of strategies for bringing down costs.

The FAFSA AND STUDENT DEBT