Despite the headlines, college is still the surest path to higher earnings over the course of a lifetime. But a degree will pay off much more if you didn’t borrow a small amount to get it.
Free application for federal student aid, or FAFSA, is a key step toward making college affordable. Applications for the 2023-2024 school year open on October 1, and those who apply early have the best chance of receiving more free tuition money.
D. Jean Hester, who has overseen college recruiting and admissions for schools in Ohio and Oregon for more than a decade, advises getting in line as soon as possible. While the federal government hasn’t run out of money for need-based aid, colleges and states have.
“Do it this fall. There’s absolutely no reason to wait, says Hester.
When you file the FAFSA, you’re applying for need-based aid, which can make a big difference in where you decide to go to college and how much debt you’ll have after graduation. Every dollar you receive in grants, scholarships, and work-study is a dollar you won’t have to beg family or borrow.
Applying early also means you’ll get a financial aid offer from the colleges you’re applying to sooner, Hester notes, giving you time to compare offers or resolve any discrepancies.
“It’s one of those things that you just have to let go of,” she says.
Types of aid covered by the FAFSA
The FAFSA is used to calculate the Expected Family Contribution, or EFC. Subtract the EFC from your school’s official cost of attendance to show your financial need; The completed FAFSA then serves as your application for financial assistance to help fill that hole.
A completed FAFSA reveals the following types of federal, state, and need-based school aid:
- Pell Grants.
The current maximum Pell Grant award is $6,895; any combination of grants, work-study and scholarships can cover some or all of the difference between the official cost of attending school and your family’s expected financial contribution.
The great thing is that these types of assistance do not have to be paid back.
You also need to fill out the FAFSA to qualify for federal student loans.
Keep track of your student loan debt
After completing the FAFSA, you will likely also be offered subsidized federal loans; they are called financial aid because the government pays interest on them until you graduate. But they must be returned, like any other loan.
The FAFSA also serves as an application for unsubsidized federal loans that are not tied to need. For freshmen, the amount does not exceed $5,500 per year, but increases to $7,500 in the first year.
If you need to borrow money over this amount, you can get a private student loan.
Any loan—subsidized, unsubsidized, or private—becomes part of the debt you’ll have to deal with when you graduate. A NerdWallet analysis shows that the high school class of 2022 could be facing the average debt is nearly $40,000 by the time they graduate from college.
And so far, student loan news is currently focused on President Joe Biden recent cancellation noticethe administration has made it clear that this aid is tied to the COVID aid and will not happen again.