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FAFSA 101: What You Need to Know About Financial Aid

If you’re thinking about college, you’re probably also thinking about ways to offset the cost of tuition. After all, the average annual in-state, public college tuition in Indiana is $22,010, and the average annual tuition at an out-of-state institution is $25,280. You’ve likely heard of the FAFSA, a form required to request both need-based and merit-based financial student aid. Whether or not you think you qualify, it’s important to submit a FAFSA every year throughout your college career. The government awards more than $125 billion in student aid annually—including loans, scholarships, grants and more—so you may be eligible for more than you think. Farmers State Bank is here to help you navigate the process. Read on to learn how it works and what you’ll need.
The Free Application for Federal Student Aid (FAFSA) is a government form used by colleges and universities to award student aid. The FAFSA is free to submit and determines your eligibility for federal student loans, grants, scholarships and work-study programs. You may also need a FAFSA on file to qualify for state aid and any scholarships or grants provided by your college or university.
The FAFSA is based on qualifications such as family income and investment records. While there’s no income cap required to fill out the FAFSA, the amount of need-based aid you’re awarded will depend on your family’s take-home pay. The purpose of the FAFSA is to help a college or university determine the amount of aid to offer you. Colleges use your Expected Family Contribution and the cost of tuition to calculate your potential aid package.

Expected Family Contribution, or EFC, is the amount of money the federal government estimates your family will be able to contribute to your education. It’s determined based on taxed and untaxed family income, assets owned (such as a home), benefits received (like Social Security or unemployment) and family size, including the number of college-aged children in your family.
The FAFSA opens October 1 of the prior year and must be submitted by June 30 of the following year. For example, if you were filing a FAFSA for the 2023-2024 academic year, you could begin filing on October 1, 2022. The filing period would close on June 30, 2024.

While this is a large window, it’s smart to file as close to October 1 as possible to ensure you receive the maximum available amount. Filing early also means you’ll receive your aid package before you pay tuition instead of after the fact. Some colleges and universities have their own deadlines, and states may distribute financial aid on a rolling basis. You can find your state’s FAFSA deadline on You should also check with your college or university’s financial aid office to learn the cutoff date for your school.
You can submit the FAFSA electronically through the Federal Student Aid website, or download a PDF and submit it by mail. In order to complete the FAFSA, you’ll need an FSA ID. This username and password are required to sign in to state and federal student aid websites. You can receive an FSA ID by visiting Provide your email address, Social Security number and date of birth, then choose a username and password. You can use it right away to complete the FAFSA. Note that your username never expires but you’ll need to change your password every 18 months.

If you’re considered a dependent, your parents and/or guardians will need their own FSA IDs to sign electronically. You can determine your dependency status by answering a series of questions on the Federal Student Aid site.

Your FAFSA results, or Student Aid Report, should arrive by mail or email within 3 days and 3 weeks of submission. This will tell you basic information about your eligibility for financial aid and includes a four-digit data release number to provide to your college. Review this report carefully and verify that all the information is correct.
To file, you’ll need your FSA ID, Social Security Number and driver’s license number, as well as tax and income records (use your parents’ records if you’re a dependent). Records include your W-2, federal income tax return, untaxed income records, bank statements, business and investment records and any child support or alimony records if your parents are divorced. The FAFSA is based on “prior-prior year” records, which means that if you’re applying for aid for the 2023-24 school year, you’ll want to use information from 2021. You’ll also need to provide your parents’ education levels. This applies only to your birth parents, not stepparents, although you should report the income of a stepparent married to your primary caregiver or financial provider.

If your parents are divorced, use information from your custodial parent. If your parents have joint custody, use information from the parent with whom you’ve lived the most over the past 12 months, or the one who provides the most financial support. Remember, both you and your parent (or parents) will need to provide individual FSA IDs.
The FAFSA is used to determine eligibility for federal student loans, scholarships, grants and work-study programs. Federal student loans can be subsidized or unsubsidized. While both accumulate interest, the key difference is that with subsidized loans, you won’t accrue interest until after you graduate. Unsubsidized loans begin accumulating interest as soon as they’re taken out.

Scholarships and grants are the most desirable forms of financial aid. Unlike loans, scholarships and grants provide free money that you don’t need to pay back. Many may be merit-based and available through individual states, schools and local organizations. Common federal grants include the Pell Grant, which is available to undergraduate students for a maximum of 12 semesters. Federal Pell Grant amounts can vary and change annually. For the 2023-24 academic year, the maximum amount is $7,395. An alternative to the Pell Grant is the Federal Supplemental Educational Opportunity Grant (FSEOG), available to undergraduate students who demonstrate “exceptional financial need.” Qualifying students can receive $100-$4,000 per year.

Work-study programs may also be an option. With a work-study program, you’ll use any income earned toward your college tuition. You won’t have to pay any money back, but you will have to work for it. You can also receive loans from your state or college, or take out a private loan from Farmers State Bank.

The amount of aid you receive is determined by a number of qualifying factors. To estimate the amount of aid for which you may be eligible, use the government’s student aid estimator.
Once you choose a college and qualify for financial aid, you’ll receive an aid offer from your school’s financial aid office. To receive your aid, you’ll first need to accept it. You may be offered multiple forms of aid, in which case, you should accept in this order: grants and scholarships, work-study, subsidized federal student loans, then unsubsidized federal loans. This maximizes the amount of free money you’ll receive while minimizing the loans you’ll need to pay back.

To learn more about student aid and other ways to manage your money, visit the Federal Student Aid website or contact the team at Farmers State Bank. We can answer questions about the FAFSA and help you explore options so you can spend more time planning for college and less time getting your finances in order.

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