There’s one very big reason guidance and financial aid counselors advise students and their families to file the Free Application for Federal Student Aid (FAFSA) as early as possible: The money runs out.
Colleges use the FAFSA to determine a student’s eligibility for financial aid via “nine federal student-aid programs, 605 state aid programs, and most of the institutional aid available.” [Via Wikipedia.] All of those programs have limited pools of funds; most allocate funding on a first-come, first-serve basis.
1. The Deadline. The FAFSA becomes available online each January 1st for the following school year. FAFSA provides a deadline of June 1st, but some states set an earlier deadline, and most colleges will provide a recommended deadline of March 1st.
2. The Tax Return. Completing the FAFSA requires at least a draft of the previous year’s tax return. So the Jan. 1, 2013 version of the FAFSA, required for the 2013-2014 academic year, needs data from your 2012 tax return. Some counselors will advise filing taxes first and linking the FAFSA to the IRS electronically for verification. Yet, most families will still be waiting for tax forms (1099s, W-2s, etc.) when they complete the FAFSA; hence, the draft return.
3. The Paperwork. FAFSA’s Help link provides this list of the records you will need, in addition to the tax return. When dealing with the FAFSA, “you” always refers to the student.
Your Social Security card.
Your driver’s license (if any)
Your 2012 W-2 forms and other records of money earned
Your (and if married, your spouse’s) 2012 Federal Income Tax Return.
Your Parents’ 2012 Federal Income Tax Return (if you are a dependent student)
Your 2012 untaxed income records
Your current bank statements
Your current business and investment mortgage information, business and farm records, stock, bond and other investment records
Your alien registration or permanent resident card (if you are not a U.S. citizen)
4. Getting it right. I won’t start a list of all the things that are confusing about the FAFSA. This post would never end. I will try to provide some help.
When preparing our draft 2012 tax return, our accountant provided a worksheet which matched dollar amounts from our return with FAFSA question numbers. If you know the difference between American Opportunity education credits and tuition deductions and which benefits you the most, you may not need any help. If, like me, this sort of help comes in handy, download a pdf of the blank form.