The Free Application for Federal Student Aid is one of the most widely used ways for students to apply for various types of financial aid, including grants, loans, and work-study programs. Below are a few examples of how the FAFSA can influence your financial aid.
Depending on where you live, the timing of when you fill out your FAFSA can have a huge bearing on how much financial aid you receive. There are six states that operate on a first come, first served basis: Illinois, Kentucky, Tennessee, North Carolina, South Carolina, and Vermont. If you live in one of these states, you should fill out your FAFSA as soon as possible in order to have the best chance for more financial aid. FAFSA is accepted every year starting on January 1st, so file as close to that date as you can so that you do not lose money due to being too far back in line.
While most public colleges and some private ones use the FAFSA to determine what financial aid you qualify for, some private colleges use a stricter system called Institutional Methodology to determine what financial aid you will receive. This system takes home equity and retirement accounts into consideration, so it often results in less aid. However, if you are wanting to apply for aid at a school that only uses this system, you will not have much choice but to use that information and hope for the best. In these cases the FAFSA may not influence your financial aid much at all.
One of the things you are asked to do when filling out the FAFSA is to list the colleges you are considering attending. They then send your information to those colleges so that they can get moving on processing your financial aid should you be accepted and choose to attend there. In some cases, however, schools are using that list against the student. Some colleges are offering less financial aid to students who rank their school highly on the list — for example, a student who lists the school as number two may get less financial aid than a student of the same financial means who listed the school as number seven. The theory behind this is that a student who ranks the school higher wants to go there more, so they may be willing to pay more out of pocket than the student who has the college listed near the bottom of their list.
Scholarships can be based on either need or merit. While some are given out by the US Department of Education, many more are distributed by colleges and private institutions. In these cases, the content of your FAFSA will matter little or possibly even not at all, especially for the merit based scholarships. Those scholarships are based on your grades and achievements rather than any financial need you may have. It is still recommended to fill out the FAFSA in addition to any scholarships you may receive, as many scholarships cover only tuition, while some things covered by the FAFSA, such as the Pell Grant, may help cover books, supplies, and even housing while you are in school.