Why You Should Fill Out the FAFSA Even if Your Parents Earn a Lot

Students from families with various incomes may benefit

Four young adults with books and backpacks walk together outside.
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With today's high cost of tuition for both state colleges and private universities, even students from wealthier families may feel financial strain.

Students with parents or guardians whose income is considered high may wonder if they should even bother filling out the Free Application for Federal Student Aid (FAFSA), the key form to apply for federal student aid.

You may be surprised to learn it can be beneficial to fill out the FAFSA, even if you think your parents’ or guardians’ income is too high to qualify for financial aid. Let’s review some of the potential advantages to taking the extra time to submit this document.

Key Takeaways

  • While the FAFSA may disqualify children of high earners from grants, many families still can benefit from subsidized loans.
  • FAFSA forms are often required to be considered for non-need-based merit aid, which benefits anyone whose academic performance is high enough to receive it.
  • FAFSA doesn’t have a single FAFSA income limit, so with occasional changes in aid calculations, you might be on the cusp of receiving aid and not know it. Apply every year, just in case.

What Is the FAFSA?

The FAFSA, or Free Application for Federal Student Aid, is an application form college students fill out to apply for many types of financial aid. The FAFSA asks for information on a student's family assets as well as parent/guardian income and liabilities to produce a number called Expected Family Contribution (EFC).

The EFC is an estimate of what a typical family in specific financial circumstances could afford to contribute to a student’s college education. The EFC is then subtracted from the total Cost of Attendance (COA) at a particular school. The resulting number is considered the student’s “financial need,” or that gap that needs to be filled with aid.

Starting Jan. 1, 2022, the term “Student Aid Index (SAI)” will replace Expected Family Contribution (EFC). This is to underscore the fact that the system is an index for distributing funds, and not intended to reflect what a family can or can’t pay.

Scholarships and loans are intended to fill the gaps between the EFC and the costs of attending a college. According to Sallie Mae, scholarships and grants covered 25% of the college costs, and borrowed funds such as student loans covered 20% for academic year 2020-2021. 

Furthermore, among all the students and their families paying for college:

  • 56% used scholarships to pay for some portion of college
  • 50% used grants
  • 47% used borrowed funds

Why Fill Out the FAFSA Regardless of Income

The FAFSA has some quirks, like the fact that your family’s EFC is changed by things such as having an older child in college already.

One of the big reasons to go ahead and fill out the FAFSA the fact that it could unlock some financial aid beyond federal grants and aid that require you to demonstrate financial need. The FAFSA also opens doors to scholarship opportunities that are not necessarily based on financial need.

Filling out the FAFSA is free, so you won’t take any financial loss.

When you fill out the FAFSA, you’ll receive a Student Aid Report (SAR), which includes details that will be shared with any schools you share it with. They will use that report to help them create a financial aid package for you.

The FAFSA doesn’t just affect Federal Pell Grants, which offset costs for low- and middle- income students’ education. This form is also used in determining subsidized, lower-cost student loan eligibility, and some schools use the form to make choices about how to offer their own aid.

FAFSA Income Limits

Overall, there are no hard income limits on filling out the FAFSA for receiving some kind of aid, grants, or loans.

Your personal “financial need” for school is the COA minus the EFC. If your financial need is determined to be $6,000 a year, you won’t receive more than $6,000 in need-based aid.

However, the FAFSA is a requirement for more than just need-based aid. It is also required for scholarships that are issued based on need.

In other financial aid that begins with filling out the FAFSA, Pell Grants are focused on lower-income students. In 2021-2022, no Pell Grants are offered to families whose EFC is higher than $5,846. This often translates to incomes lower than or around $50,000 a year, but multiple factors can affect whether you receive a full Pell Grant or partial  funding.

Taking the time to fill out this form could pay off for students from families of any income level. For instance, if your family’s income is high, but your school is very expensive, you may still have a demonstrated financial need. That means you could qualify for a subsidized loan, for example.

When Your Parents’ Income Counts

Dependent young adults should understand how their parents’ or guardians’ income affects their financial aid. Your parents’ or guardians’ income is generally considered a key factor in how much you can pay for school, even if they can’t actually contribute as much as the determined EFC.

If you are considered financially independent of your parents or guardians, their incomes, no matter how high, may not be considered in calculating your EFC. Independent status is a bit complicated, but filling out the FAFSA can determine whether you fit that status.

The following situations could qualify you as financially independent of your parents’ or guardians’ income:

  • You are 24 years old or older.
  • You are married or separate but not divorced.
  • You are pursuing a non-bachelor’s degree such as a master’s degree or doctorate
  • You have dependent children.
  • You are active duty in the military or a veteran.
  • You have been in the foster care system since you turned 13.
  • You are an emancipated minor.
  • You are homeless.

These circumstances can be complex. Make sure you disclose all relevant and requested details to ensure you receive an accurate offering after filling out your FAFSA.

Merit-Based Financial Aid

Colleges are working with a complex set of federal, state, and institution-based aid sources. They want to offer as many competitive aid packages as possible to draw in more students. They often have all students apply through the FAFSA, even students who may qualify for only merit-based financial aid.

If you do qualify for a grant at the federal level, the school can offer you a combination of need-based aid and merit-based financial aid.

Why You Should Apply Every Year

Applying for the FAFSA each year you have education expenses can benefit you because changes in your family’s income or assets can change what you’re offered. You can submit a renewal FAFSA, which allows you to simply update pre-filled information from a previous form.

You can also benefit if there are changes to the calculations for federal aid. For example, calculation changes could mean you qualify for a slightly larger subsidized loan.

What You’ll Need To Apply

You can submit the FAFSA online. It’s a fairly easy process. First, gather your personal information, including your:

  • Social Security Number (or Alien Registration Number)
  • Family income tax returns
  • Bank statements and records of investments
  • Records of any untaxed income
  • FSA ID to sign electronically 

You’ll input this information data into the form. Your EFC and financial need will be calculated automatically.

It makes sense to wait to until you’ve been admitted to at least one school before applying for the FAFSA because aid amounts are based on the cost of the school, so they vary.

You can add up to 10 colleges on a FAFSA. Once they receive your information and have evaluated your college application, they can create a personalized financial aid package for you that will include any federal aid you qualify to receive. You can compare the packages as part of your decision about where to attend.

How To Appeal Your FAFSA Results

In some cases, if you disagree with the FAFSA results, you can appeal them. Most appeals will be sent through your chosen school’s financial aid office. If, for example, you’ve had a major change in your dependency status or your family’s financial situation since your EFC was calculated, you can write an appeal letter to your school, explaining the situation. Make sure to follow any rules or guidelines they set for the appeals process.

Frequently Asked Questions (FAQs)

When is the FAFSA due?

The last date you can fill out the FAFSA for aid for the 2021-2022 school year is June 30, 2022. Be aware, however, that most schools have their own deadlines. The application is available in October, so you can start quite early. States may have their own deadline for FAFSA submission if you want to be eligible for state-based aid.

How long does the FAFSA take to process?

Most online FAFSA applications are processed within three to five days, and paper FAFSA forms are processed between seven and 10 days after they are mailed. If you’re concerned that your school didn’t receive your FAFSA information, contact your school’s financial aid office to confirm receipt.

Who should not fill out the FAFSA?

If  there is no chance of you using any loans and your family will pay the full cost of your education, you may not want to spend time filling out the FAFSA. However, for others, filling out the FAFSA can be worthwhile because it can result in financial aid, including aid that is not based on need.