How not to make mistakes on the FAFSA

When you and other counselors hear that the FAFSA Simplification Act of 2023 made it easier to apply for federal financial aid for college, you may think, “This will be easy!”

True, the act reduced the number of questions, but counselors and families still find the form so complex and overwhelming that the process seems designed to confuse them. It’s been estimated that 90% of families submitting the Free Application for Federal Student Aid make at least one mistake.

Here are some tips to help your students avoid the common pitfalls.

Deadlines

Yes, deadlines – plural. The federal deadline to submit the FAFSA for the 2026-27 academic year is June 30, 2027, which is in itself confusing, but the deadline is set so a student can apply for aid for the summer term. According to Sallie Mae, the private corporation that handles federal student aid, 17% of applicants missed the deadline entirely in 2023-2024.

For the 2027-28 academic year, the FAFSA will become available in October, and your families should submit it as early as possible because grant money is handed out on a first-come, first-served basis.

Apart from the federal deadline, each state has its own FAFSA deadline to determine eligibility for state-based financial aid programs.

Institutional financial aid forms such as the CSS profile have various deadlines that are typically earlier than the deadline for federal forms. It’s important to check each school’s financial aid website or contact their financial aid office to find out their specific deadline.

Net worth

The purpose of the FAFSA is to determine the Student Aid Index (SAI), the amount of college funding that will need to be provided by the student and their family. Cost of attendance minus SAI equals need, or the portion of college expenses that is eligible for financial aid. You can see how important this number is.

Part of that calculation is net worth. If you’re defining “net worth” as all assets minus all liabilities, hold on, because the federal government has a different definition. Home equity on the primary residence is not included in the net worth calculation for FAFSA. If parents include home equity as an asset, they are giving the government more information than it’s asking for. (Rental properties, however, are included as assets.)

If your students are going to be filling out the FAFSA this fall for the 2027-2028 academic year, they should work with a college planning specialist or financial adviser now to legally reclassify and shelter assets to lessen their impact on financial aid eligibility. For example, a 529 college savings account held in the student’s name will hurt eligibility more than if it’s in the parent’s name.

Income

When they file the FAFSA, their tax return data can be transferred directly from the IRS using the data retrieval tool. It’s preferrable to use this process rather than entering the information manually because it will help avoid errors.

The good news is that any income that isn’t reportable can’t be included. The not-so-good news is that rather than using adjusted gross income (AGI), all of their income, including tax-deferred income from 401(k) contributions, will be included. This is a common error when adding data manually: entering AGI instead of total income.

If they are filling out the FAFSA this fall for the 2027-2028 academic year, the income being reported will be from your 2025 tax return, which will be filed by April 15 this year, so, working with a finance expert, they still have time to make adjustments in how their income will be reported.

Other common pitfalls

·       Make sure the names on the FAFSA match legal names as they appear on Social Security cards.

·       Double-check institutional codes for the colleges they want to receive the FAFSA. Sometimes there are different codes for various campuses of the same institution and for graduate vs. undergraduate programs.

·       In divorced families, confirm whether the income reported is from the custodial parent or the parent who provides more financial support. This may vary by school.

·       Make corrections if needed. If there are significant changes in family circumstances, such as the loss of a job or illness, they can go into the FAFSA and update the information.

There are people you can pay to complete your FAFSA, but there’s no magic in that. Rather, I recommend that parents print out the PDF forms from studentaid.gov, review every question with the instruction page, and take time to prepare the data manually rather than simply doing it online.

It’s not too early to get these ducks in a row. The 2027-2028 FAFSA will be available before we know it.

Brian Safdari, who founded College Planning Experts in 2004, is a Certified College Planning Specialist™. He and his team have assisted more than 7,500 students nationwide on their college journey using their exclusive My College Fit System and financial planning tools. For more information or a consultation, please visit collegeplanningexperts.co