FAFSA: Definition and What It Is
FAFSA stands for Free Application for Federal Student Aid. It is the form the U.S. Department of Education uses to determine a student's eligibility for grants, work-study programs, and student loans. It is also used by most states and many colleges to determine eligibility for their own financial aid programs.
The FAFSA collects financial information about the student and, for dependent students, their parents. That data is used to calculate a Student Aid Index (SAI) which schools use to determine how much institutional and federal aid to offer. The form is submitted online at StudentAid.gov and should be completed as early as possible each year, since some aid is first-come, first-served.
Why it Matters
Completing the FAFSA is the most important step a student can take to access federal aid. Skipping it means forfeiting any federal grants and student loans that you might qualify for. Those who skip the FAFSA and go straight to private loans are often taking on more expensive, less flexible debt.
The FAFSA also affects state and institutional aid at most schools. Missing the deadline can cost thousands of dollars in grants that do not need to be repaid. Filing annually, even if circumstances have not changed dramatically, is worth doing. Yrefy's college finances guide covers how the FAFSA fits into the broader financial planning process for students.
Example
A first-generation college student from a low-income family does not file the FAFSA because they assume they won't qualify. They take out $18,000 in private loans to cover their first year. After a friend encourages them to file, they discover they would have qualified for the full Pell Grant plus subsidized loans that would have covered most of their costs at a much lower total interest rate. The private loans they already took cannot be undone.
