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Why is FAFSA Important?

Completing your FAFSA is important because it offers several potential ways to finance your education including grants and loans.


The FAFSA is the most important tool available to finance your education, and while the term may be familiar, some don't know what it means. What does FAFSA stand for? It stands for the Free Application for Federal Student Aid. If there's one thing you need to know about it, it's this: You don't have to be intimidated.

“Don’t be scared. It’s not hard,” said Kristine Sedita, a team lead on Southern New Hampshire University’s (SNHU) Enrolled Student Services team. Her team helps students and parents navigate the FAFSA process to get federal aid such as Pell Grants and subsidized and unsubsidized loans.

What is FAFSA? What is FAFSA Used For?

The FAFSA is an application that the federal government uses to gather the financial information it needs to assess what loans and grants you qualify for. The FAFSA needs to be completed each new school year to receive this aid. 

“It’s the tool the government uses to measure a family’s financial strength,” Sedita said. “The FAFSA is the only way you will receive any federal funding.”

Donna Camire with the text Donna Camire

Although you are applying for federal aid, the process is coordinated through the school or schools you plan to apply to.

"It is completed on, and any U.S. citizen can apply for the FAFSA," said Donna Camire, the SNHU Global Campus director of Student Financial Services. "The amount and type of financial aid that will be offered to you will be based on information provided on the FAFSA."

Federal student aid is the best way to pay for college for several reasons. First, you may qualify for grants, which is money the government gives you that you don’t need to repay. Any loans you accept, you will have to repay, but they have lower interest rates and repayment doesn’t begin until you graduate or otherwise stop going to school. Also, if you qualify for a subsidized loan, the interest doesn’t begin accruing until you leave school.

“We try to promote FAFSA first, said Roisin Bettencourt, a team lead on SNHU’s Student Financial Services team. “We would always tell a student to get the better aid through the government first.”

How to Afford College: The FAFSA Explained

College doesn’t have to be out of reach financially. If you’re wondering how to pay for college, a few concrete steps can get you on the path to earning your degree.

What Do I Need to Fill Out the FAFSA?

The first thing you need to fill out the FAFSA is a Federal Student Aid (FSA) identification number. This is the information you will use to sign in to the federal student aid website and to sign the FAFSA. You can obtain your FSA ID through the FAFSA website by providing some basic information, such as your date of birth and social security number. If you are a dependent student, one of your parents will also need to obtain an FSA ID.

Ensure you keep your FSA ID somewhere safe as you will need it every time you log in and complete your FAFSA. 

Once you've completed your FAFSA for the first time, the information will carry over year after year. You'll need to ensure you make any updates to your form each year, whether that be a change in income, marital status or dependents as a few examples. 

How Do I Determine if I’m a Dependent Student?

Kristine Sedita with the text Kristine SeditaTo be considered a dependent student you have to meet a number of conditions, such as being under 24 years old and unmarried. If you meet any of the following criteria, you are an independent student, according to the U.S. Department of Education’s Federal Student Aid Office:

  • 24 years old or older
  • Married
  • Graduate student
  • Military veteran or member of the armed forces
  • Orphaned
  • Ward of the state
  • An emancipated minor who is homeless or at risk of being homeless
  • Someone with legal dependents other than a spouse

Most students attending a traditional 4-year college right after graduating high school will be considered dependent students. There is a series of 10 questions on the FAFSA – including your age, residence and prior military service – that will determine your status. As a dependent student, you can qualify for up to $5,500 in loans in your first year of college. As an independent student you can qualify for up to $9,500, Bettencourt said. 

Once you have your FSA ID and have determined if you are a dependent or independent student, you can use the Internal Revenue Service’s (IRS) Data Retrieval Tool to import your tax information directly into the FAFSA form. While that’s convenient, it doesn’t import all of the necessary information and won’t be available if you haven’t filed your taxes, so you’ll need some additional finance and tax documentation, including:

  • Tax Records: The FAFSA uses what is called prior-prior year tax information to calculate your eligibility for federal education aid. That means if you’re applying for aid to be used in the 2022-23 school year, you need to provide your 2020 tax information, such as a W-2 or 1040 form.

  • Untaxed Income: If you have other income that isn’t taxed by the government, such as child support or interest income, you’ll need to have the documents that show that income.

  • Other Assets: This includes the balances of your checking and savings accounts, the value of any investments you have, as well as the value of any property you own aside from your primary residence. These values are not based on prior-prior year date, but the values as of the date you sign the FAFSA, Sedita said. 

Once you have provided all of the necessary information, the FAFSA will provide an Expected Family Contribution (EFC) and a Student Aid Report, a series of funding options you qualify for. If, based on your EFC, you qualify for the Pell Grant, it will be listed here. You will also be offered at least one of two types of federal loans. 

It’s important to remember that you don’t have to accept any of the aid offered. These are options you have, and one of the smartest steps you can take now is to speak with a financial counselor at the school you’re interested in attending. They can help you evaluate how your aid package compares to the actual cost of attending the school, what amount you may have to pay in addition to the federal aid, as well as options for covering that additional cost.

“The FAFSA is a really smart starting point,” Bettencourt said. “Once that’s done, touching base with a financial counselor is really smart because they might have some other options.”

Types of Grants and Loans

Now that you have a financial aid package offer, it’s important to understand what exactly you’re being offered:

  • Grants – A federal grant, such as the Pell Grant, is money you can use for your education and don’t have to pay back to the government. The specific amount you may be awarded a Pell Grant is based on your EFC, the cost of the school you attend and other factors.

  • Loans – There are two main types of direct loans offered by the U.S. government. Subsidized loans are offered based on financial need, and the loan interest doesn’t begin occurring as long as you are enrolled in school at least part-time, plus an additional six months after you leave school. An unsubsidized loan is not based on financial need and interest does accrue while you are attending school.

The amount of money you can borrow in subsidized or unsubsidized loans varies and depends on your dependency status and what year you are in school. Loans can range from $5,500 to $12,500 per year, according to the Department of Education's Federal Student Aid Office.

There are also Direct PLUS Loans, which are available to parents of undergraduate students or students pursuing a graduate degree.

What Can FAFSA Money Be Used For?

Roisin Bettencourt with the text Roisin Bettencourt Any financial aid you receive doesn't come all at once and is typically broken up throughout the year based on your enrollment. That money you get from the federal government through the FAFSA process can be used for educational purposes. In general, that means tuition, books, room and board and other various fees schools might charge.

Bettencourt said one of the most important considerations to make before choosing a school to attend and accepting your financial aid offer is how much you need to borrow – as opposed to how much you can possibly borrow – and what your repayment schedule will look like once you graduate.

“I think the biggest thing that people need to realize is that it’s an application for grants and loans and it’s their choice to use the loans,” she said. “We want people to take what they need … instead of taking everything.”

Bettencourt compared it to buying a car. Part of taking out a car loan, for most people, includes evaluating what the monthly payments are going to be. That should be the case for educational loans, too, she said, but sometimes isn’t since those payments often won’t start for several years.

What are the Deadlines for Filling Out the FAFSA?

The FAFSA process starts Oct. 1 for the school year that begins the following fall and must be completed by the end of June. But many states have priority deadlines, which you can find here

Online. On campus. Choose your program from 200+ SNHU degrees that can take you where you want to go. 

Joe Cote is a staff writer at Southern New Hampshire University. Follow him on Twitter @JoeCo2323.

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