Without the savings to afford American colleges and universities, it’s not surprising that many students turn to financial aid to help get them through. Whether you qualify for grants or have to settle for federal loans, you need to fill out the Free Application for Federal Student Aid (FAFSA) to get government help in covering your education costs.
The good news is that there are no FAFSA income limits for 2020. You can fill out the FAFSA no matter your economic situation and see if you qualify for some financial aid.
What types of federal student aid are available?
Figuring out your financial need with the FAFSA
Fill out the FAFSA
What types of federal student aid are available?
While there are no overall FAFSA income limits, the type of aid you’re eligible for and whether you qualify for need-based financial aid will depend on your family’s finances.
Even if you don’t think you qualify for need-based aid, though, it makes sense to fill out the FAFSA to see if you can get non-need-based aid. You have to complete a FAFSA each year to keep receiving federal student aid.
Below are the types of federal financial aid you can obtain as a result of filling out the 2020 FAFSA.
Federal Pell grant
This is free money for school that typically doesn’t have to be repaid. The amount you receive depends on your financial need and the cost of attendance at your school. Amounts for Pell grants change annually. For 2019-20, the maximum Federal Pell Grant award was $6,195.
Pell grants are available only to undergraduates, and you can only receive them for 12 semesters.
Federal Supplemental Educational Opportunity Grant (FSEOG)
Undergraduates with “exceptional financial need” can qualify for for between $100 and $4,000 a year. While the government provides enough Pell grant money for each participating school to cover all its eligible students, that might not be the case with the FSEOG.
Check for other grants, including those for future teachers or for the children of fallen U.S. service members, to see what you might qualify for.
Federal work-study programs
Schools participating in work-study programs in the government-funded part-time jobs for qualifying students with financial need. This program is available for undergraduate and graduate students alike. In many cases, the work you do should be related to your course of study or involve community service.
You can expect to earn at least the federal minimum wage. However, there are times that you could be paid more, depending on the skills needed for the job, as well as the funds the school has available.
Direct subsidized loan
If you have financial need, and grants aren’t covering the cost of school, a federal subsidized loan can help close the gap if you’re an undergraduate. The government usually pays the interest on the direct subsidized loan while you attend school — as long as you are enrolled at least half-time — and during your student loan grace period, which usually runs for six months after you leave school.
Your interest rate depends on the rate Congress sets for the school year. Rates are reviewed annually, and each new school year results in a new subsidized loan, based on the information used to update your FAFSA on an annual basis.
Direct unsubsidized loan
This financial aid program is not based entirely on economic need. You can receive an unsubsidized loan for any amount up to the year’s limit or your school’s cost of attendance (whichever is less), regardless of whether you’re an undergraduate or a graduate student. When you borrow using this program, the government won’t pay any of your interest, so it will accrue and be added to your loan amount if you don’t make interest payments while you’re at school.
Direct PLUS loan
Graduate or professional students can take out these loans, as can parents of undergraduate students. The interest is unsubsidized, so the borrower is responsible for the total cost of the debt. Interest rates on PLUS loans are higher than those charged on direct subsidized and unsubsidized loans.
The maximum amount you can borrow in PLUS loans is based on the cost of attendance at the school, minus all the other financial aid you receive. For other direct Loans, plan for your borrowing limits.
Figuring out your financial need with the FAFSA
The point of the FAFSA is to help schools figure out your need. That’s right: The school determines what kind of federal financial aid package you get.
How much you need is decided by comparing your Expected Family Contribution (EFC) with the cost of attendance at your school.
Expected Family Contribution (EFC)
The EFC is calculated using a formula that is set by law. Financial aid offices at colleges use the information included on your FAFSA to determine how much your family can reasonably be expected to pay to cover your education expenses. Some of the items taken into consideration include:
Your family’s income (taxed and untaxed) and current assets
Any benefits (such as Social Security and unemployment) you or your family receive
The size of your family
The number of siblings you have attending college during the school year
Although there are no FAFSA income limits, there is an earnings cap to achieve a zero-dollar EFC. For the 2020-2021 cycle, if you’re a dependent student and your family has a combined income of $26,000 or less, your expected contribution to college costs would automatically be zero. The same goes if you (as an independent student) and your spouse earn no more than $26,000 annually.
Once your EFC is determined, it’s subtracted from your school’s cost of attendance.
Cost of attendance
When you fill out your FAFSA, you specify which schools you want the information sent to. Each school has its own cost of attendance, based on what you would pay to attend the school for two semesters.
In some cases, though, you might seek a certification rather than a degree. Such a program might last a different length of time. Pay attention to the period covered to understand your financial aid award better.
The cost of attendance estimate includes tuition and fees, as well as room and board. It also includes what you can reasonably expect to pay for books, supplies, loan fees, eligible study-abroad programs and transportation. Finally, the estimate can also include an allowance for child care and disability costs.
Need-based and non-need-based financial aid
Once the school has your FAFSA, it can put together an aid package. You might be offered a combination of need-based and non-need-based options.
For example, your cost of attendance is $18,000 for the year and the EFC formula indicates that your family should be responsible for $14,000 of that amount. Your need-based aid maximum would be $4,000. It might be offered to you in the form of grants, subsidized loans or work-study aid.
Of course, you could run into a problem if your parents can’t afford your EFC.
That’s where the non-need-based aid comes in. You might be offered a direct unsubsidized loan, and your mom or dad might need to take out a PLUS loan as well. Your EFC doesn’t determine your non-need-based aid. Instead, it looks at your cost of attendance and subtracts all the other aid you have, including your need-based aid, any merit-based scholarships you obtained from the school or private sources, and all other sources of aid.
Say for example, your cost of attendance is $18,000 and you receive $4,000 in need-based aid. And if you have a merit-based scholarship amounting to $6,000, your non-need-based total is $8,000. You might be offered a combination of non-need-based aid up to that amount.
Each year, you should fill out the FAFSA to determine your financial aid eligibility, since it can change. If your younger sibling follows in your footsteps to college, for example, you might find yourself eligible for additional need-based aid.
How to get financial aid: Fill out the FAFSA
Head over to the Department of Education website to start your FAFSA application. You’ll need to have the following ready as you complete the process:
Social Security Number and, if applicable, Alien Registration Number
Financial account statements
Federal income tax returns, W-2s and other records of money earned
Be aware that you may be able to pull in your (parents’) tax documents via the IRS Data Retrieval Tool available within the FAFSA form.
While you don’t need a Federal Student Aid ID (FSA ID) to fill out the FAFSA, it can be a good idea to create an FSA ID. Having an FSA ID can make it easier to find your application once it’s started, as well as to access other information about financial aid throughout your college career. You can quickly pull up your student aid reports, as well as keep track of your direct loan servicers.
If you have your information together, it’s possible to complete your application in 30 minutes or less. Plus, you could complete the 2020-2021 FAFSA form via the myStudentAid app.
You can also use the FAFSA4caster tool to estimate your potential financial aid before you even start your application, so you can get an idea of where you stand.
FAFSA applications open on Oct. 1 for the following school year. Apply early since some of the money is handed out on a first-come, first-served basis. The earlier you apply, the better your chances of getting the help you need for school.
In the end, the FAFSA can be a big help as you look for the funds to pay for college. It’s a good starting point to see what financial aid you qualify for. So keep FAFSA deadlines in mind as you near the next school year, and check out this FAFSA guide for more details..
Andrew Pentis contributed to this report.
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