As the fall season kicks in, October brings a crucial financial planning milestone for families with college-bound students: FAFSA season. The Free Application for Federal Student Aid (FAFSA) opens annually on October 1st, marking the beginning of the financial aid process for the upcoming academic year.
If you’re a parent, guardian, or student preparing for college, completing the FAFSA early—and accurately—can have a major impact on your financial aid package.
Why FAFSA Matters
The FAFSA is the gateway to federal financial aid, including:
- Grants (which don’t have to be repaid)
- Federal student loans
- Work-study opportunities
In addition, many states, colleges, and private scholarships use FAFSA data to determine their own aid awards. Skipping the application or submitting it late can mean missing out on thousands of dollars in potential aid.
Even if you think your income is too high to qualify for need-based aid, it’s still smart to file. Some merit-based scholarships require a FAFSA on file, and federal student loans, often the most favorable borrowing option, also require FAFSA completion.
Key Changes in 2025
As part of the FAFSA Simplification Act, the Department of Education is rolling out changes aimed at streamlining the form and making it more user-friendly. Some updates to be aware of:
- Fewer questions and a more intuitive interface
- A shift from the “Expected Family Contribution (EFC)” to the new Student Aid Index (SAI)
- Changes in how income and assets are assessed
While the goal is simplification, change can also bring confusion. Families should take time to understand the new terminology and formula, especially if they’ve filled out FAFSA in previous years.
Financial Planning Considerations
Filing early increases your chances of receiving aid from limited state and institutional funds. Here are a few tips to prepare:
1. Review Your Income and Assets
FAFSA looks at prior-prior year tax information. For the 2025–2026 school year, this means using your 2023 tax return. Understanding how your income and assets affect aid eligibility is key—particularly for business owners or those with non-retirement assets.
2. Understand 529 Plan Impact
If you’ve been saving for college in a 529 plan, know that parent-owned accounts are treated more favorably than those owned by grandparents or other relatives. Strategizing withdrawals can also reduce the impact on aid eligibility.
3. Avoid Costly Mistakes
Common errors include inputting incorrect Social Security numbers, mixing up parent and student information, or leaving sections blank. Working with a financial advisor or using a FAFSA prep checklist can help ensure accuracy.
Get Ahead, Stay Informed
The FAFSA might seem like just another form, but it’s one that can significantly affect your college funding strategy. Submitting early, understanding the process, and aligning your financial plan can make a meaningful difference.
If you have questions about how FAFSA fits into your family’s broader financial picture, especially tax planning, 529 strategies, or retirement account positioning, please reach out to me at 301-990-9170 or email geoff@montgomeryfinancialpartners.com.
Let’s make sure your student gets every dollar they’re eligible for.
Recent Comments