The Free Application for Federal Student Aid


It’s been validated by the U.S. Census Bureau that college graduates actually earn more during their lifetimes–as much as $1 million more–than students who don’t go beyond high school. For the majority of college-bound students, federal aid is available. Filing the Free Application for Federal Student Aid (FAFSA) is the first step to discovering how much aid is available to you.

Here’s what you need to know.

Getting started.
The cost of going to college has risen over 40 percent in just ten years. For the majority of students and their families, education loans–whether private or federal–will be an essential source of college funding. In fact, low-cost federal loans account for nearly 70 percent of all financial aid dollars. How can you find out just how much you’ll receive? There’s only one way–by filing the Free Application for Federal Student Aid, or FAFSA for short.

Why submitting the FAFSA is important.
Don’t make any assumptions about how much aid you will receive. Just go ahead and file. And even if you think you’ve got your college expenses covered, filing the FAFSA allows you to keep your options open, just in case you decide to apply for federal and state funding.

This form determines your eligibility for federal aid, as well as for state and institutional grants, loans, and work-study programs. The Student Aid Report (SAR) that you receive after filing is your ticket to federal funding. While you can submit the FAFSA anytime during the school year, you will need your SAR to apply for free money from programs such as CalGrants. The CalGrants application deadline is March 2, and funds from this California program are allocated on a first come, first served basis. That means you should file the FAFSA as soon as possible after January 1st. Even before you know where you’ll be attending college, having your SAR in hand increases your chances for receiving both free money and financial aid.

Your financial aid options

What’s the difference between a grant and a loan?
The simple answer is that you don’t have to repay grants, and you do have to repay loans. If you want more information, read on.

Federal loans
Generous federal aid is available to you through programs such as the Pell Grants, Federal Family Education Loan Program (FFELP), including the low rate Stafford or PLUS Loans, for which anyone can apply. Using federal money for your education offers several advantages. Besides their primary purpose of helping you pay for college, handling student loans responsibly can help you establish good credit for future purchases, such as a home mortgage or automobile. Federal student loans also offer low interest rates, possible tax benefits, and repayment options–such as deferring payments while you’re in school–that high interest credit cards do not.

If you are a California resident planning to attend a qualifying California college, you could receive thousands of dollars a year in free money for your college expenses from CalGrants. This requires only that you be a high school senior or recent graduate, have a 2.0 minimum GPA, meet the eligibility and financial requirements, and submit two forms by the March 2nd, deadline. To establish your eligibility, you must first file the FAFSA. Get all the details at www.calgrants.org. You can also go to www.Californiacollegegoalsunday.com for help in filling out these forms and to find out where free “Cash for College” workshops are offered in California.

Additional Information Cal Grant Awards:

Apply for a Cal Grant by March 2nd*
To apply for a Cal Grant, students must do two things: submit a Free Application for Federal Student Aid (FAFSA); and file a Grade Point Average (GPA) Verification form, or make sure their high school has filed the GPA on their behalf. Both forms must be submitted, or postmarked, no later than March 2*.

Cal Grant Awards guaranteed for students who qualify
College is now more affordable than ever for students with good grades and financial need. The best part is that Cal Grants cost nothing to apply for and do not have to be repaid!

Students who meet the following criteria are guaranteed grants:

Cal Grant A Entitlement Awards
Requirements include financial and basic eligibility (see box below), a minimum 3.0 grade point average (GPA), and graduation from high school. This Entitlement Award provides for full fees at the California State University and the University of California, as well as tuition support at private California colleges and universities.

Cal Grant B Entitlement Awards
Requirements include financial and basic eligibility, a minimum 2.0 GPA, and graduation from high school. This Entitlement Award provides up to $1,551 for books and living expenses for the first year. Beginning with the second year of Cal Grant B benefits, this award also helps pay for tuition and fees at public or private four-year colleges or other qualifying institutions.

Basic Cal Grant eligibility requirements:

All Cal Grant applications must:

  • Be California residents
  • Be U.S. citizens or eligible non-citizens
  • Meet U.S. Selective Service requirements
  • Attend a qualifying California postsecondary institution
  • Be enrolled at least half-time
  • Maintain satisfactory academic progress as defined at the school of attendance
  • Have family income and assets below the established ceilings

For additional information about Cal Grant eligibility requirements, please visit the California Student Aid Commission Web site at www.csac.ca.gov. Contact the Commission’s Customer Service staff at 888-224-7268 (888-CA-GRANT) or by email at custsvcs@csac.ca.gov.

Federal grants
Eligibility and award amounts for Pell Grants, the largest federal grant program, are based on established federal guidelines and determined by the college. Generally, Pell Grants are awarded only to undergraduate students who have not earned a bachelor’s or professional degree. (A professional degree is earned after earning a bachelor’s degree in a field such as medicine, law, or dentistry.) In some cases, students may receive a Pell Grant for attending a post-graduate teacher certification program. For many students, Pell Grants provide a foundation of financial aid to which other aid may be added.

Getting Started with filing the FAFSA
While the process may look complicated, we want to make it easier for you. Here’s how to get started:

  1. Before completing your FAFSA online, we recommend that you first complete the non-submittable Web Pre-Application Worksheet and/or the paper FAFSA form. As you fill out this document, you’ll become familiar with the answers, documents, and information you’ll need to complete the online application. Then, you can just transfer your entries to the online version.
  2. At the FAFSA site, www.fafsa.ed.gov, you’ll find more specifics about what is needed to file, as well as how to file by mail or online. Once you’ve established your PIN, you’ll be able to access and sign your FAFSA electronically.

    • Each January 1 starts the application period when students can file a FAFSA online at www.fafsa.ed.gov or file a paper FAFSA. Students may obtain a paper FAFSA from their high school counselor or college financial aid office.
    • Get a FAFSA PIN Now!
      To file a FAFSA online, students need a PIN and a parent needs a PIN too.

      Students may log onto the Internet from a computer and go to www.fafsa.ed.gov. Then click on the “Getting Started” button and follow the prompts. It’s quick and easy.

  3. Submitting your application online has several important advantages.

    • Because your answers are edited automatically, you can avoid mistakes.
    • The online FAFSA automatically skips questions that don’t apply to you.
    • Clear, step-by-step instructions streamline the process.
    • You’ll receive your SAR much sooner than if you use the paper application.

More FAFSA Facts
Below are more tips follow for streamlining your filing process.

  • Start now – Fill out the FAFSA as soon as possible after January 1st. Federal, state, and institutional aid (the money from your college) is distributed on a first come, first served basis. Be sure to check the application deadlines for other aid for which you may be eligible. The earlier you file your FAFSA, the sooner you can submit these other forms, and get your slice of this year’s aid. To view State Aid deadlines.

  • Know the language – Financial aid has its own specialized terminology. You can find a guide to terms such as EFC (Estimated Family Contribution), Subsidized and Unsubsidized Loans at the Department of Education Web site. The Resources section of our Web site also contains an excellent Glossary.

  • Keep a copy of your FAFSA – It is important to keep clear, accessible records of all your financial aid material. A copy of your FAFSA will come in handy when you receive your SAR, and also when it comes time for filing a renewal FAFSA to continue receiving federal aid during subsequent college years. It will also make it easier to complete any additional financial aid forms that your school may require.

  • Applying for the FAFSA is free – You don’t have to pay a fee to apply for the FAFSA. Some Web sites, such as www.fafsa.com, www.fafsaonline.com, and www.fafsaapplication.com, charge to help with filling out the online form. The Department of Education site provides free FAFSA forms, and offers the most comprehensive information available about applying for federal aid. It is also the only site where you can submit your online FAFSA form officially.

  • Help is available – Keep a list of your questions, and when you’ve gone through your Web Pre-Application Worksheet, you can call for help from the Federal Student Aid Information Center, 800.4.FED.AID (800.433.3243). Information is provided in both English and Spanish.

The Information you’ll need up front.
To make filling out your FAFSA easier, gather the documents you need to reference before you answer any questions. Start by searching for these things:

  • Social Security card
  • Driver’s license
  • Alien Registration Card (if applicable)
  • Current bank statement and mortgage information
  • Completed 2004 federal income tax returns, including W-2s and 1099s forms (or an accurate estimate of your income if you can’t file early with the IRS)
  • Records of untaxed income, such as Social Security income, welfare, AFDC (Aid for Dependent Children), and veterans’ benefits
  • If applicable, records that relate to any unusual family circumstances (for example, medical and dental bills not covered by health insurance, unusually high child support costs or loss of employment)
  • Records of your family’s assets and investments, not including your primary residence
  • Business and farm records (if applicable)

Dependent and Independent
When applying for financial aid, you’ll need to determine whether you’re a “dependent” or an “independent” student.

Most graduate and adult students are considered independent. Independent students are required to report only their personal financial information on the FAFSA form (and their spouse’s if applicable).

Most students entering college right from high school are considered dependent. Dependent students must report both their own financial information and their parents’ financial information on the FAFSA.

In certain circumstances, a Financial Aid Administrator might determine that a student should be considered independent. You may also be considered an independent student if you meet any of the following criteria:

  • You were born before January 1, 1980
  • You’re married
  • You have children who receive more than half of their support from you
  • You have dependents (other than your children or spouse) who live with you, who receive more than half of their support from you now, and who will continue to receive more than half of their support from you
  • You’re an orphan or a ward of the court (or were a ward of the court until age 18)
  • You’re a veteran of the U.S. armed forces

The FAFSA helps the U.S. Department of Education and the Financial Aid Administrators at your school determine if you qualify for various types of financial aid. Eligibility for federal aid is based on financial need and several other factors. To receive help from these programs you must:

  • Demonstrate financial need (except for certain loans)
  • Have a high school diploma or General Education Development (GED) certificate or pass a test approved by the U.S. Department of Education
  • Be working toward a degree or certificate
  • Be enrolled in an eligible program
  • Be a U.S. citizen or eligible non-citizen
  • Have a valid Social Security number
  • Register with the Selective Service if required
  • Maintain satisfactory academic progress once you’re in school

The Fastest FAFSA
You’ve obviously got a handle on this computer stuff. Why not try the online FAFSA form? Here are just some of the advantages to applying online:

Online FAFSA

  • Fewer mistakes – With the online FAFSA, answers are automatically edited as you input them. That means you’ll have a better chance of answering all the questions correctly the first time. You can avoid time-consuming corrections, having to resubmit your application and missing important financial aid deadlines, too. Plus, if corrections are needed, fixing them is faster and easier online.
  • Simpler application – The online FAFSA only asks questions that are relevant to your situation. The online FAFSA automatically skips questions that don’t apply to you.
  • Online help is available – The online FAFSA comes with clear, step-by-step instructions to ensure that you understand each question, and get them right the first time.
  • Faster processing – With the online FAFSA, you receive the results of your application seven to 14 days faster than if you use the paper application.

FAFSA Checklist
So, you’ve decided not to go with the online FAFSA, that’s okay. There’s still plenty of help available for filling out the traditional paper FAFSA. Here are some tips to ensure that your paper FAFSA is completed correctly:

  • Make a copy of the FAFSA to use for a practice run
  • Use a ballpoint pen with dark ink or a number 2 pencil
  • Print neatly and carefully, using CAPITAL letters
  • Don’t use liquid white – out: if you need to correct an entry, draw a single line through the mistake and initial the correction
  • Fill in the ovals completely
  • Complete all sections: if the instructions tell you to skip a question, leave it blank; if your answer is none or zero, enter “0”
  • Write your name exactly as it appears on your Social Security card
  • Write numbers below 10 with a zero in front; for example, the month of May should be written as 05
  • Round all dollar amounts to the nearest whole dollar
  • Double-check all your entries
  • Make a copy of your completed FAFSA and all documentation used.
  • Keep all copies in a folder so you can find the information when you need it
  • Make sure all required signatures are on the application
  • Don’t mail your tax return or any other documents with your FAFSA – they will be destroyed

After all your hard work, you certainly don’t want to miss out on the opportunity to obtain financial aid because of a missed deadline. Here are the deadline requirements you need to keep in mind:

  • Fill out the FAFSA and any other student financial aid applications as soon after January 1 as possible. While the federal deadline to submit the FAFSA is June 30, many states require you to submit the FAFSA no later than March 1, and some have a February 15 deadline. Ask your Financial Aid Administrator for details.
  • Don’t submit your FAFSA application before January 1; it won’t be processed. If you submit the application before the first of the year, you’ll be required to resubmit it.
  • To ensure accuracy on the FAFSA, file your tax returns as soon as possible after January 1. If you can’t file early, don’t delay completing your FAFSA. Simply estimate your income as accurately as possible to complete the relevant sections.
  • If you find that you have missed the FAFSA submission deadline, you will need to wait until January 1 of the following year.

File On-Line and File On-Time!

State Aid Deadline 
AR  For State Grant – April 1, 2005 For Workforce Grant – July 1, 2005 (date received) 
AZ  June 30, 2005 (date received) 
*^  CA  For initial awards – March 2, 2005 For additional community college awards – September 2, 2005 (date postmarked) 
DC  June 28, 2005 (date received by state) 
DE  April 15, 2005 (date received) 
FL  May 15, 2005 (date processed) 
IA  July 1, 2005 (date received) 
IL  First-time applicants – September 30, 2005 Continuing applicants – August 15, 2005 (date received) 
IN  March 10, 2005 (date received) 
#*  KS  April 1, 2005 (date received) 
KY  March 15, 2005 (date received) 
#^  LA  May 1, 2005 Final deadline – July 1, 2005 (date received) 
#^  MA  May 1, 2005 (date received) 
MD  March 1, 2005 (date postmarked) 
ME  May 1, 2005 (date received) 
MI  March 1, 2005 (date received) 
MN  14 days after term starts (dated received) 
MO  April 1, 2005 (date received) 
MT  March 1, 2005 (date processed) 
NC  March 15, 2005 (date received) 
ND  March 15, 2005 (date received) 
NH  May 1, 2005 (date received) 
NJ  June 1, 2005 if you received a Tuition Aid Grant in 2004-2005 All other applicants: •  October 1, 2005 fall & spring term •  March 1, 2006, spring term only (date received) 
*^  NY  May 1, 2005 (date postmarked) 
OH  October 1, 2005 (date received) 
OK  April 30, 2005 Final deadline – June 30, 2005 (date received) 
PA  All 2004-2005 State Grant recipients & all non-2004-2005 State Grant recipients in degree programs – May 1, 2005 All other applicants – August 1, 2005 (date received) 
PR  May 2, 2005 (date application signed) 
RI  March 1, 2005 (date received) 
SC  June 30, 2005 (date received) 
TN  May 1, 2005 (date processed) 
*^  WV  March 1, 2005 (date received) 

Check with your financial aid administrator for these states: AK, AL, *AS, *CT, CO, *FM, GA, *GU, *HI, ID, *MH, *MP, MS, *NE, *NM, *NV, OR, *PW, *SD, *TX, UT, *VA, *VI, *VT, WA, WI, and *WY.

# For priority consideration, submit application by date specified.
^ Applicants encouraged to obtain proof of mailing.
* Additional form may be required

When your Federal Aid is not enough.
While you are filing your FAFSA for federal and state aid, we recommend that you look for scholarship opportunities. We provides scholarships to students of all backgrounds, and offers access to over $7.5 billion in additional scholarship funds through a scholarship search database.

For educational expenses not covered by scholarships or traditional financing, you can also look into private loans. We can offer you and your parents a variety of private loans with flexible repayment options and competitive variable interest rates. Along with tuition and fees, these loans can be used to cover room and board, books and equipment.

Withdrawals from an IRA for college expenses

On or after January 1, 1998, an individual can make withdrawals from his/her IRA to pay for qualified higher education expenses for academic periods beginning on or after January 1, 1998, without paying the 10 percent early withdrawal tax. The 10 percent early withdrawal tax does not apply to a distribution from an IRA to the extent that the amount of the distribution does not exceed the qualified higher education expenses for the taxpayer, the taxpayer’s spouse, and the child or grandchild of the taxpayer or the taxpayer’s spouse at an eligible educational institution.

For purposes of this rule, the term “qualified higher education expenses” means tuition, fees, books, supplies and equipment required for the enrollment or attendance of the student at an eligible educational institution. Qualified higher education expenses also include room and board if the student is enrolled at least half-time. Qualified higher education expenses paid with an individual’s earnings, a loan, a gift, an inheritance given to the student or the individual claiming the credit, or personal savings (including savings from a qualified state tuition program) are included in determining the amount of the IRA withdrawal which is not subject to the 10 percent early withdrawal tax. Qualified higher education expenses paid with a Pell Grant or other tax-free scholarship, a tax-free distribution from an Education IRA, or tax-free employer-provided educational assistance are excluded.

Educational Saving Bonds Overview

The Savings Bond education tax exclusion permits qualified taxpayers to exclude from their gross income all or a portion of the interest earned on the redemption of eligible Series EE and I Bonds issued after 1989 in the name of a taxpayer age 24 or older at the date of issuance. To qualify for this exclusion, tuition and other educational expenses must be incurred by the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent at certain post-secondary educational institutions.

FSEOG: Federal Supplemental Educational Opportunity Grant

FSEOG is for undergraduates with exceptional financial need-that is, students with the lowest Expected Family Contributions-and gives priority to students who receive Federal Pell Grants. An FSEOG doesn’t have to be paid back.

The U.S. Department of Education guarantees that each participating school will receive enough money to pay the Federal Pell Grants of its eligible students. There’s no guarantee every eligible student will be able to receive an FSEOG; students at each school will be awarded an FSEOG based on the availability of funds at that school.

You can receive between $100 and $4,000 a year, depending on when you apply, your need, the funding level of the school you’re attending, and the policies of the financial aid office where you attend school.

529 Plans Overview

State-sponsered 529 plans offer significant tax benefits for college bound students.  There are two types of 529 plans available which include guaranteed tuition plans and mutual fund-based plans.  In many states the 529 Guaranteed Savings Plans allow parents, grandparents and others to purchase college tuition credits at today’s prices for use in the future, no matter what the inflation rate for college tuition.  Mutual fund-based 529 accounts, put the burden of investing on the parents. Most states offer portfolios made up of several mutual funds, and investors choose a portfolio based on their time frame and risk tolerance.  Many plans offer age-based portfolios that move the funds into more conservative investiments as your child approaches college age.

The new tax law makes the Section 529 college investments plans very attractive:

  • The earnings of a 529 account are not federally taxed as they accumulate.  Withdrawals from 529 plans are completely federal tax-free, if the money is spent on qualified educational costs.  The investments into 529s are made with after tax dollars.  Only cash can be invested into 529 plans.
  • Some state plans allow for contributions to and withdrawels from 529 plans to be exempt from state tax.  That makes several in-state 529 plans a great choice.  Some states have a $2,000 dollar limit exemption of state taxes and a few states have no limit on tax free contributions or withdrawels. Check your state plan in the Links>College Savings Plans>529 Plans
  • Any 529 plan can be transfered from one child to another. This is especially good news if the first child does not spend the entire funding amount. Also, you can have one plan for your first child and transfer the plan after the first student graduates, thus saving 529 management fees for two plans, if there is enough break between their college.
  • Contributions into 529 plans can be made by parents, grandparents and anyone else that wants to contribute to the childs college fund.
  • Many state 529 plans have a maximum contribution of over $200,000, which should satisfy any future college expenses.
  • 529 plans have a very high contribution level of $11,000 per year, starting in 2002. Another great feature is that a contributor can fund up to $55,000 as a one time contirbution covering the next five years. This is a great opportunity for wealthy individuals interested in minimizing estate taxes.
  • Unlike the old UGMA, the donor controls how the money is spent in a 529 plan.  Under the UGMA, when the child becomes an adult, they can spend the money any way they want, even buying a fancy sports car.

Some disadvantages of 529 plans:

  • Administrative and management fees for 529 plans are higher than comparable mutual funds. Until your account reaches a minimum level, expect to pay an annual maintenance fee.  Many states have more reasonable fee structures, check out the 529 plan links.
  • Investment opportunities are restricted to certain mutual funds, limiting the investment potential.
  • Expect to pay more if you go through a Broker. If possible, go directly to the state 529 plan. (See Links: College Saving Plans> 529 Plans)


Coverdale Educational Savings Account (ESA)

Taxpayers may deposit up to $2000 per year into an Coverdale ESA for a child under age 18, if your taxable income is less than $95,000 (single) and $190,000 (married) and disappear at $110,000 and $220,000. Parents, grandparents, other family members, friends, and a child him/herself may contribute to the child’s Coverdale ESA.  Each child may only have $2,000 contributed in their name per year.  That is, if the grandparents contribute $1,000 to a plan they set up, then the parents can only place $1,000 in a plan.  Great news, starting in 2002, you can contribute to both a 529 plan and a Coverdale ESA.

The new tax law makes the Coverdale ESA plan very attractive:

  • The earnings of a Coverdale ESA are not federally taxed as they accumulate.  Withdrawals from the account are completely federal tax-free, if the money is spent on qualified educational costs.  The contributions are made with after tax dollars.  Only cash can be invested into Coverdale ESA.
  • The choice of investments are much broader than the 529 mutual plans.  Therefore, the money has a chance to perform better than the 529.  If you are investment savy, then this plan might warrent a close evaluation.
  • Coverdale plans often cost less to manage and maintain than the 529 plans.  Therefore more of the contribution dollars are available for growth.
  • Maybe most importantly, the Coverdale ESA can be used for elementry and secondary education.  If you invest early enough, the Coverdale can help in private schools.

Some disadvantages of Coverdale ESAs:

  • Coverdale ESAs have a limit of $2,000 per year per child, and the income limits as stated above.
  • Some 529 plans are exempt from state income tax for contributions and withdrawels.  This is a big disadvantage for the Coverdale ESA, which does not receive this state tax break.
  • Contributions for the Coverdale are limited to the child’s age of 18.