Why should all students complete the FAFSA?

Summary

What is the FAFSA form and why should every student fill it out? And what do you need to know about the major changes coming to the FAFSA submission process for the 2024-2025 academic year? 

Summary 

In this podcast episode, Adam Sparkes interviews Sarah Kasabian-Larson, the director of scholarships and financial aid at Central Michigan University, about the FAFSA form. FAFSA stands for Free Application for Federal Student Aid and is used to determine a student's eligibility for various types of financial aid, including grants, scholarships, work-study, and loans. Sarah emphasizes that all students, regardless of their financial situation, should fill out the FAFSA because there may be aid opportunities available that they are unaware of. She also explains that the FAFSA can be sent to up to 20 schools and that surprises in terms of aid eligibility can happen, even for students who think they may not qualify. Sarah advises against paying for FAFSA assistance, as there are free resources available to help students complete the form. She also discusses changes coming to the FAFSA, including a simplification of the application process and an increase in Pell Grant eligibility. Sarah addresses common questions and concerns, such as who should be listed as a parent on the FAFSA and what information is needed to complete the form. She also explains the timeline for receiving financial aid offers after submitting the FAFSA. Overall, the episode provides valuable information and guidance for students and parents navigating the FAFSA process. 

Transcript

Chapters 

Introduction

What is the FAFSA form?

What changes are coming to the FAFSA form?

Adam: But with changes coming to FAFSA too, it's contributors like all contributors to the student's economic situation. Which does that include the student themselves too, right?

Sarah: Yes. Yep. The contributor is the student, the parent, the parent's spouse, and then if the student is married, then the parent and the parent's spouse do not go on the FAFSA, but the student's spouse would go on the FAFSA and anyone that's on the FAFSA giving income information is the contributor.

Adam: This is for anybody. You could be going back to school. You could be going to school for the first time. You could be 50 and going to get your degree and you should still file for FAFSA.

Sarah: Absolutely, yep. And anyone that is pursuing a degree should file the FAFSA. You just don't know what aid is out there.

Adam: Everyone needs an account. Right, so I think, I imagine that's probably a little bit of an entanglement too, is if you've got, maybe you have four parents in a scenario that are contributing income towards student's financial situation, every one of them needs to have an account on the FAFSA website, correct?

Sarah: Well, so only one biological parent would go on the FAFSA if there's a separation. If both biological parents are married, they both go on the FAFSA, but one biological parent, if there's a separation would go on there and then their spouse. So if there's a 50/50 situation where...

Adam: You get to pick one.

Sarah: Yes, you need to pick one. Students aren't going to know which parent is providing the most financial support, so they'll need parents' help in deciding that. Just sit down and see who's providing the health insurance, car insurance, food, clothes, things like that.

Adam: Yeah, it's not just you like mom or dad. They've got to fill out their end of the paperwork, right? It's sort of like everyone has to turn the key at the same time if they're in the nuclear submarine. Right?

Sarah:  Yes. Everyone is going to have to do their part, so each parent that is going to go on the FAFSA as a contributor will need an FSA-ID or also known as studentaid.gov account ID, and this allows you to log into the FAFSA and so when the student logs in, they're going to input the parent that they're going to say is their parent of record and who is the contributor and invite that parent to the FAFSA. It's really cool. They have a dashboard where you can see who you invited and where they are in their steps so a student can keep track of a parent in the process and then the parent logs in with their ID to input their own information and they have to give consent to the FAFSA process because what's happening in the background is it is pulling IRS data from a direct data exchange essentially, and it's pulling it into the FAFSA in the background. No one's going to see the IRS information, but it's allowing the FAFSA process to be completed and for us to know what the student's aid eligibility is.

Adam: You can be on your mom and dad's case if they're not getting it done fast enough.

Sarah: The catch to all this is when the student invites a parent or their spouse to the FAFSA, they only have 45 days to complete their section, otherwise the FAFSA gets erased essentially and they have to start over, so they need to make sure they're paying attention to their dashboard and that their contributor is doing their part of the FAFSA.

Adam: Is that a common stopping point for folks?

Sarah: Well, this is new. My guess is it will be a common stopping point and they're going to have to start over. It's going to be very frustrating. I will say, schools won't even know where you are in the process, so that will be definitely a barrier because normally we know where a student is in the process and we can help them follow through with completing documents and whatnot. This time we won't be able to until the FAFSA is completely submitted.

Adam: Hopefully it's easy, right, because like you had said, it's automatically pulling that tax information, not like you're having to do your taxes or certainly you can look right, but you don't have to go look at different line items on a tax return to figure this out. You're just going, "Yes.”

How does the FAFSA Simplification Act impact the FAFSA process?

Sarah: Yeah, absolutely. The IRS direct data exchange is going to be huge for the FAFSA and it is new due to the FAFSA Simplification Act.

Adam: Boom. What else has happened with that? Yes, tell us about that. That starts this year, right? Absolutely. Or 2024.

Sarah: Yep, for the 24/25 academic year. So, the FAFSA is delayed right now and will open by December 31st. By law, they have to have it out on January 1st, so they have to get it done by December 31st. Typically, the FAFSA opens on October 1st, so this delay is because it's undergoing significant changes, it's going from over 100 questions down to 36, and a big part of that is because of this IRS direct data exchange, as you said, you're not going to have to get out your 1040 and try to figure out what line item goes where on the FAFSA. It will automatically link up in the background when the contributor provides consent to the FAFSA. The FAFSA Simplification Act was designed to simplify the financial aid process for students and families, helping those barriers be brought down so students' families can complete the process. I did read on average it should only take 20 minutes for a student to complete the FAFSA, which is huge because right now it can take up to an hour for everyone to do their part, so their hope is with the FAFSA Simplification Act, it will be easier for students to file the FAFSA, more will get it done, and that enrollment numbers for universities and colleges will increase because people are not going to feel this barrier of the FAFSA holding them back.

Adam: Talking about that IRS process, if you or your guardians don't pay taxes, you still fill this out. There's no reason to not do it.

Sarah: Absolutely. Good question. Everyone. When you have a contributor, they'll go in, there will be a section where they provide this consent and it's kind of lengthy. It's basically disclosures saying what's happening in the background. Again, no one is going to see that information. It is definitely in the background of the FAFSA. If someone has not filed their taxes in the direct data exchange, it will send your information over to the IRS to search for the taxes and if it's not there, it will send information back saying that this individual is not a tax filer. In addition, if someone does not have a social security number, which might happen, parents might not have one, they can still create an FSA-ID and still be a contributor on the FAFSA and provide that consent for students to complete the process.

Adam: So, there's no reason not to do it. You all heard it here first, so it's really easy. There's no reason to not do it. What are some of the other changes we're seeing going into the '24 or '25 academic year?

Sarah: Yes, so with the FAFSA Simplification Act, not only are they looking to simplify the financial aid process, they're also looking for Pell Grant eligibility to increase, and that is because the FAFSA, again is being simplified and brought down, and so different criteria are being brought into play for Pell Grant eligibility. So they are increasing the Pell Grant eligibility across the board because the way they look at the Pell Grant is going to be based on poverty threshold and the income of a household, as well as how many family members are in the household, which is going to increase eligibility. Not only that, the FAFSA Simplification Act, again, is changing dramatically, the FAFSA.

So, one big thing, if you filed the FAFSA before, you might've seen the result of the FAFSA, which is the EFC right now, that is called the Expected Family Contribution. It's a number you get at the end of filing the FAFSA, and as financial aid administrators, we use that to determine need-based aid and the Pell Grant eligibility. Into the future to create transparency with students and families, they've changed the name of that result of the FAFSA to Student Aid Index or SAI. And so this number again still means the same thing to us to help determine need-based aid eligibility and in some cases the Pell Grant eligibility because as I said, it's used, the Pell Grant is being looked at for the poverty threshold and household size, so we're looking at max Pell and minimum Pell, but then we also use the SAI for looking at in between Pell.

In the end, as individuals filing the FAFSA, you don't really need to know about it, but just know that the result is changing, so you'll see a different number and you might see a number that is a negative number, and essentially that's just telling us this is the neediest student, and so we need to pay close to attention to them. So, the result of the FAFSA is changing. Other things that are changing is they're still asking for a number in college, so how many individuals in the household are in college? However, it is not part of that SAI calculation, nor is it part of the Pell Grant eligibility calculation. But even with all of that considered, they still believe due to the FAFSA Simplification Act and the way the FAFSA's changing that there will be more Pell-eligible students.

Adam: Going into the Simplification Act too, there's going to be a change to pre-tax deferrals for income as well too, which I would think would positively impact that Pell Grant eligibility. Your contributions to pre-tax investments like an IRA or something is going to not being counted, right?

Sarah: Yes. Yep, they removed that. Yep.

Adam: Explain what that is though because I don't think I did a good job. You probably have a much better.

Sarah: Good question. Yeah, so they have right now on the current FAFSA, a lot of untaxed income boxes you have to fill out. I mean there is a lot, and so they're removing most of those. There are some things though that they are kind of switching around. So for instance, currently family farm is not considered an asset and with the FAFSA Simplification Act, it will be considered an asset, so you'll have to figure out how much of your family farm is actually an asset with small businesses. Right now, any business with less than a hundred employees, they do not have to consider that as an asset, but in the future they will. So, while they removed a lot of untaxed income information like the pre-tax dollars that you're saving towards pension and IRA, those things are getting removed, but they're also moving other things into assets. But the thought is that will increase more Pell-eligible students.

Adam: Fewer people are benefiting from the family farm or the business under a hundred being owned than people who are probably being hurt by having a pre-tax contribution to a retirement fund or something like that. There's more folks are doing that type of thing financially than owning a farm, I'm guessing.

Sarah: Right. I will say that it was really confusing to have those questions on the FAFSA because you have to get out your W2 form and I believe it's in box 12. You have to know which letters you're looking at to put on the FAFSA, so it is definitely a win for the students and parents to not have to worry about putting all these different boxes onto the FAFSA.

Adam: What are some of the biggest questions that you get from students here or you get from parents here when it comes to getting into the financial aid process?

Sarah: One item that I get questions about a lot are, so the FAFSA is based on prior year tax information. So, for the 24/25 academic year next year, the FAFSA will be based on 2022 tax information, which is like two years ago for some folks when you start filing, and that can make a huge change. You might've had a change in your job, there might've been a divorce or a death in the family and something might have changed. So I get a lot of questions as to what do I do now? So, you still file the FAFSA using the correct information because it will still link up with the IRS and share that, but you can reach out to the financial aid office and complete what's known as a special circumstance and we can look at your current financial situation to see what can be done to your FAFSA to update it with information that is current to your financial situation.

What information do I need to have on hand to fill out the FAFSA form?

Adam: What do I need? So, before I go to fill it out from the parent perspective and from the student's perspective, what's the information that I do need to have on hand? What do I need to be ready for? So if I'm going to sit down this year and it's only going to take 20 minutes because it’s only 40 questions now, what needs to be in front of me at the desk so that I can make sure that that happens?

Sarah: Yeah, good question. So, first you need that FSA-ID or Studentaid.gov account id, and that allows you to get into the FAFSA and if you are a student doing it yourself without your spouse or your parent nearby, you're going to need their information so you're able to invite them to the FAFSA. So, you're going to need their social security number, birthdate name, and their FSA-ID.

Aside from that, you'll just need to know your savings information, checking account information and assets, because once you give consent, it will link up that IRS information. If for some reason it cannot, then you might have to get out your tax information, but my guess is that will be very slim situation, so you really just need to have the information of yourself and of your contributors so that you can invite them.

When will students receive their financial aid offers?

Adam: How long does it take for this process to get to somebody like yourself in a financial aid office and how long until I know what types of benefits I might be getting from the institutions I'm interested in?

Sarah: Great question for right now, because with the FAFSA delay, that means there's going to be a little bit more delay in other things. So, the FAFSA with opening up on December 31st, once everyone's able to get in there and file the FAFSA, which I recommend, if you do not have your FSA-ID to get that before you sit down to file the FAFSA, that would be the very first thing you want to do. When it opens and you file it, typically the school that you put on, remember you can put on 20 different schools on there. They usually would receive it within two to three business days. However, with the delay in the FAFSA and the changes that are coming, there is a delay this year with when schools are going to start receiving those FAFSAs, the result of the FAFSA. So, for this year, we're not going to receive it until end of January or February at the earliest.

Once we receive it, we'll be able to review and see if we need anything further from the student, which sometimes we do. Sometimes we have to collect household information, tax information, variety of different things. And then when everything is all set, we will be sending out award notifications to the student with their offer in early March. This is a little bit of a delay. Normally, again, when the student files that FAFSA about three business days later, we will receive it and we'll be able to get the offer notification out within a couple of weeks to the student, but with the delay of the FASFA, everything is kind of a little bit of a longer timeline.

Adam: All right, so a little bit longer this winter, but after that you can typically expect two, three weeks, something like that sound, right? Or should we call it three/four? What do we want to give people here?

Sarah: Well, so normally when the student files their FAFSA and their incoming student, they will get their offer notification in January, and then if they file their FAFSA later in January or February, they will get it within a couple weeks at that point.

Adam: Incoming student, right? Yeah, that's an important word because it's not just incoming students that are filing for FAFSA, right? Yep. Who else is filing FAFSA? 

Sarah: Continuing students, yes.

Adam: So, this is not a one-time thing folks.

Why is it important to file the FAFSA early?

Sarah: Absolutely, yes. You file that FAFSA every single year. And so, even though we have this delay now, as soon as it opens next year, it will be October 1st. I have faith in that and every year after that will be October 1st, so making sure you file it right away. The deadline is published as May 1st on our, for CMU's website, but I would say you just need to file it as soon as it opens. That way you can maximize your own ability and your eligibility for all forms of financial aid. You never know if the state is going to wherever you're looking to attend or wherever your home state is. You never know if they're going to place a state deadline for the FAFSA. Just finally, and as soon as it opens is the best way to do it.

Adam: We've had folks in on the podcast from admissions, and it's also apply early. You get your financial aid in early, then you can apply it to your institution early because getting access to other benefits earlier, especially if they're a limited resource in terms of scholarships or grants or things like that, it starts at knowing where you're at and where your FAFSA status is, right?

Sarah: Yes, absolutely. When you apply and you're admitted and then you file your FAFSA, and we get that, that allows us to build the most accurate and comprehensive financial aid offer to the student where we can have their merit scholarships on there, along with all need-based aid as well.

Adam: Yeah, so get it done early. No one's saying you have to get up and do it at 5:00 AM.

Sarah: You can do it at 5:00 a.m.

Adam: You can do it at 5:00 a.m. But if you want to do it at 10:00 p.m. just do it early in the month. Do it earlier in the year. Well, this has been really enlightening, Sarah. Thanks so much for making me realize that I can at least wait three more years to deal with this stuff for my kids. I don't remember when I did it myself. It was too long ago because I'm old, so thank you so much for coming in.

Sarah: Yeah, no problem. Happy to be here. I am very passionate about financial aid, and so I'm happy to share some insight into the FAFSA.

Adam: Awesome. Thank you again. Thank you so much for stopping by The Search Bar. Make sure that you like and subscribe so that you never have to search for another episode.