Everything You Need to Know about the FAFSA in 2021 Steps, Problem Solving & Expert Advice for College Financial Aid

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Genevieve Carlton

The cost of college continues to rise. In 2018, the average cost to attend a public college reached nearly $18,000, while private college reached over $46,000 per year. Fortunately, the federal student aid program distributes $120 billion in federal grants, loans, and other forms of student aid every year. Students can qualify for federal aid by filling out the FAFSA.

Our FAFSA guide walks through how to fill out the FAFSA, the documents you need to complete the form, and common FAFSA mistakes. This page also includes a FAQ that answers key FAFSA questions.


Documents Required for Completing the FAFSA

  1. Driver's license number, if applicable
  2. Alien registration number for applicants who are not U.S. citizens
  3. Federal tax return information for independent students
  4. Tax information for parents of dependent applicants
  5. Tax information for spouses, if married and filing separately
  6. Documentation of all untaxed income, such as child support and veteran benefits
  7. Banking information, such as checking and saving account balances
  8. All proceeds received from investments in stocks, bonds, real estate, business, and farming assets

What Kinds of Aid Does FAFSA Provide?

The federal student aid program provides grants, loans, and work-study funding to students. The amount applicants can receive after filling out the FAFSA varies depending on their financial need, enrollment status, and degree level. For example, only undergraduates qualify for direct subsidized loans, while only graduate students can take out a grad PLUS loan.

In 2018, undergraduates received over $15,000 in financial aid, while graduate students received over $28,000.


The U.S. Department of Education awards grants to qualifying college students. Unlike loans, grants do not require repayment, making them one of the best forms of federal financial aid. As a result, students should prioritize accepting grants before taking out loans.

The federal aid program awards Pell Grants, Federal Supplemental Educational Opportunity Grants, TEACH Grants, and Iraq and Afghanistan Service Grants. Some grants require proof of financial need, such as the Pell Grant. Others apply to students in specific programs, such as the TEACH grant, which supports undergraduate and graduate students pursuing teaching degrees.

Grant recipients generally do not need to repay the award. However, some grant programs carry service obligations. TEACH grant recipients, for example, must agree to work for four years at a low-income school or in a high-need field after earning their degree. Recipients who do not meet the service requirement must repay the grant as a loan.

Federal Loans

The federal student loan program lends money to students to cover college costs. Compared to private loans, federal loans typically offer lower interest rates, more repayment options, and better consolidation options.

The federal aid program offers three types of loans: direct subsidized loans, direct unsubsidized loans, and PLUS loans. Undergraduates who meet financial need requirements can take out direct subsidized loans. The Department of Education subsidizes the loan by paying interest while the borrower attends school and during any grace periods or deferrals. Borrowers should prioritize subsidized loans over unsubsidized loans.

Undergraduate, graduate, and professional students can take out direct unsubsidized loans. With these loans, the borrower must pay interest. Unsubsidized loans do not require proof of financial need.

Parents of undergraduates can take out PLUS loans to cover their child's college expenses. Graduate and professional students can also take out PLUS loans. Borrowers must complete a credit check to qualify.


The federal work-study program connects eligible students with part-time job opportunities. Work-study students work while in school, earning money to cover their educational expenses.

Full-time and part-time undergraduate, graduate, and professional students qualify for work-study programs. However, students must meet financial need requirements to receive work-study assistance. Students must submit the FAFSA annually to participate in the federal work-study program.

Schools connect qualifying students with on-campus and off-campus work-study jobs. These jobs typically emphasize community service, civic education, and/or work related to the student's major. Students receive at least minimum wage, with an annual cap on work-study earnings.

Schools administer the federal work-study program. Not all schools participate, so students should check with their financial aid office to learn more.

3 Common Mistakes Made by Families When Filling out the FAFSA

Avoid these three common mistakes that often discount families from receiving good gift aid from colleges.

  1. 1. Listing retirement investments and annuities as investments.

    Families are not required to list these as assets. The formula that crunches numbers for the FAFSA does not assess retirement plans and annuities, but if families put in these numbers under investments it’s going to needlessly raise their EFC calculation, and that means less eligibility for aid.

  2. 2. Listing incorrect social security numbers.

    If you are off by just one digit on your Social Security number, it negatively impacts the whole FAFSA process.

  3. 3. Listing the wrong household for students living with divorce-separated parents.

    Using the incorrect household’s financial data can increase or decrease financial aid immensely. If it’s a 50-50 situation where the student resides with both families, use the custodial parent household information that has the lower wages and assets. If you have a situation where a dependent spends 70 to 80 percent with one parent, obviously you need to use the parent where the student resides. But if it’s 50-50, use the lower one.

Learn more about financial aid with the following valuable guides

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