Applying for Financial Aid: Should We, or Shouldn't We?
Because the sticker price of college is beyond the means of most families, the decision of whether to apply for need-based financial aid may seem like a no-brainer. But anyone venturing into this thicket quickly learns that the landscape is complicated, stressful, and full of traps. We hope this brief guide will help you decide if applying for need-based financial aid is right for your family. If you do decide to soldier on, please see our companion guide, FAFSA and CSS Profile: 21 Important Tips.
Who should apply for financial aid?
Anyone who thinks they may qualify for need-based aid should apply for it. To get an early read on your child’s “demonstrated need” at the colleges on their list, I recommend inputting your numbers into four or five net price calculators. Every college has one on their website. A second place to go is the Big Future EFC Calculator.
Anyone who thinks they may qualify for need-based aid at any point in their undergraduate years should consider applying for it as an incoming freshman. Because full-pay applicants can receive an advantage in the admission process, some colleges may impose a one-year waiting period on non-submitters who then apply for aid in subsequent years. Other schools may refuse institutional aid for all remaining years. Unexpected financial events can occur, so it is best to plan for worst-case scenarios.
Anyone hoping for merit aid scholarships should verify on the college’s website whether the FAFSA (or CSS Profile) are required. At the overwhelming majority of institutions, the college application itself is all that is needed. But a tiny handful of schools may require financial aid forms, and some schools require them for specific scholarships. Always best for parents to know each school’s requirements.
Who should not apply for financial aid?
If the sticker price of the colleges your child is applying to is not a financial burden, and you are confident there will be no significant financial hardships during your child’s undergraduate years, then there is no reason to submit the FAFSA or CSS Profile.
Is there an advantage to not applying for financial aid?
Yes. The forms are invasive and time-consuming. More importantly, colleges need full-pay students in order to pay the bills. Being able to select no on the college application question, “Do you intend to apply for need-based financial aid,” and following through by not submitting the financial aid forms, can advantage an applicant.
Does this mean that full-pay applicants always receive an advantage over applicants with need? No. Each year, colleges hope to admit the best freshman class in its history, not the cheapest.
Is there a disadvantage to showing demonstrated need in the application process?
Sometimes. The application review process is an opportunity for the institution to raise its profile in lots of ways: freshmen academic stats, breadth of academic interests, socio-economic and racial diversity, competitiveness of athletic teams, and yield, to name a few. But these institutions are businesses that also need to meet their net tuition revenue goals. During the final stages of building a class, an applicant with moderate to substantial need may lose out to an applicant with no projected need.
Don’t some states require submission of the FAFSA?
Yes. About a dozen have already enacted such laws or are considering it. But parents can opt out, and there is no requirement to submit the FAFSA to every school a student is applying to.
Anything else important to know before we decide whether to apply for need-based aid?
Yes. The biggest factor in need eligibility is Adjusted Gross Income (AGI), located on line 11 of your federal tax returns. Assets are the second most important factor. The income looked at is from two years prior to the year the student will enroll in college. In other words, if the student will be enrolling in August, 2023, the tax year the FAFSA and CSS Profile look at is 2021.
There is no requirement to list all the student’s colleges on the FAFSA and CSS Profile, just those to which you are applying for need-based aid.