Step-by-step through the FAFSA: this free application can lead you to a wealth of financial aid, and filling it out is not as complicated as you may think

Careers and Colleges, Nov-Dec, 2002 by Anna Leider, Heather Lindsey

Each year, more than four million students receive some form of financial aid. To get your share, you must first file the federal government's Free Application for Federal Student Aid, better known as the FAFSA. It determines eligibility for all federal aid programs, from Pell Grants to student loans. It determines eligibility for most state and collegiate-based aid programs. And, it even determines eligibility for some merit-based aid, since many schools reserve their own (limited) scholarships for students who don't qualify for need-based funds.

How much you're eligible for will depend on the financial and personal information you provide on the FAFSA. Federal processors evaluate the data, determine your family's ability to pay, and then tell you how much you and your family should contribute toward college (or your Expected Family Contribution).

The form can be intimidating, but if you rake it step-by-step, it's worth the effort filling it out. And don't forget, it's free to file so you have nothing to lose.

GETTING STARTED

You can pick up a FAFSA in your guidance office by mid-November (or online at www.fafia.ed.gov), however, you can't file it until January 1 of the year in which you plan to start college (that's January 1, 2003, for those who hope to start college in September, 2003). You should, however, file as soon after that date as possible since a great deal of financial aid is delivered on a first-come, first-served basis. Money is awarded until it runs out; late filers get nothing.

Unfortunately, many students miss out on financial aid opportunities because they fail to meet the filing deadlines. The best financial aid awards (those heavy on grants and lighter on loans) are generally given to the earliest applicants.

GATHER YOUR PAPERS

To make sure you're one of the early birds, work with your parents to start collecting the necessary financial records over the winter holidays. To get organized, you might try putting your paperwork into two folders:

FOLDER 1: INCOME AND EXPENSE INFORMATION

All income and expense data comes from the prior year (2002 for the 2003/2004 award year).

* Taxable income for both parents and student, including wages, pensions, capital gains, interest, dividends, annuities, unemployment compensation, alimony received, rent collected, and business income.

* Non-taxable income for both parents and students including workers' compensation, welfare benefits (excluding food stamps), housing and food allowances, child support received, untaxed Social Security benefits, untaxed income from pensions and annuities, veterans' non-education benefits, tax-exempt interest income, deductible payments made to a retirement plan (such as an IRA or Keogh), and earned income credit.

* Expenses such as U.S. income taxes paid and child support paid.

FOLDER 2: ASSET INFORMATION

* The value of cash, savings, and checking accounts for parents and student.

* Net worth of all the parents' and student's investments (except for retirement plans), including stocks, bonds, CDs, money market funds, mutual funds, commodities, trust funds, Education IRAs, state-based college savings plans (except prepaid tuition plans) and real estate holdings (rental property and second homes). You need not include the equity in your family's primary residence.

* The net worth of any family business and/or farm (excluding farms that are principal residences).

You must report the net worth of all these assets as of the date you sign the form, so before you record any totals, be sure your family pays off all its bills and pays down any consumer debt, like credit card balances.

BE ACCURATE

In completing the FAFSA, be as accurate as you can. Mistakes will cause your application to be returned--for instance, giving monthly amounts instead of yearly amounts, writing in the margins, checking the ovals (rather than filling them in).

If a question or two seems confusing, call the federal student aid hot line at 1-800-4-FED-AID, or ask a guidance counselor or financial aid administrator. Many colleges now have toll free numbers for exactly that purpose. If a question still proves troublesome, explain your problem in a letter to the school's financial aid administrator.

Once you've gathered all your financial data, the FAFSA is pretty straightforward. Answer each question unless the FAFSA specifically tells you it's a step you can skip. Let's review each section:

STUDENT NAME, RANK, AND SERIAL NUMBER

Questions 1 to 16 cover the basics: The student's name, permanent address, Social Security number, date of birth, permanent phone number, driver's license number, citizenship status, and marital status.

STUDENT BACKGROUND

Questions 17 to 35 deal mostly with:

* The student's educational plans.

* His or her expected student status (full-time, three-quarter-time, half-time, or part-time).

* The highest level of education completed by the student's mother and father.

* The student's state of legal residence.

* The types of aid for which he or she wants to be considered (for example, loans and/or work-study). To maximize your chances for receiving aid, you should indicate a willingness to accept loans and work-study; you can always change your mind later.