More than half of parents with college-bound kids are leaving potential tuition money on the table, according to a new survey commissioned by Discover Student Loans.
The survey, which involved 2,015 current students, former students and parents, found that just 46% of respondents reported they had completed the Free Application for Federal Student Aid (FAFSA), and nearly a quarter (22%) of students and recent graduates admitted they don't even know what the FAFSA is.
So what is FAFSA?
The FAFSA program helps connect students with federal financial aid. The program limits federal funds based on financial need and the number of applicants, but according to the National Center for Education Statistics, about 72% of undergraduate students received some form of financial aid in the 2015–2016 school year (the most recent year for which data was available).
When it comes to college funding, it benefits students and their parents to look to federal aid options first before taking out a private loan, which typically comes with higher interest rates.
In the very best scenario, students who complete the FAFSA could qualify for a direct subsidized loan, where the government covers all interest on the loan until after the student graduates. While not as attractive, the second option is a direct unsubsidized loan, which is easier to qualify for because you don’t need to prove financial need. Unsubsidized loans begin generating interest immediately, but at a lower rate than charged by private lenders.
So why aren't people applying for federal financial aid?
Besides the surprising fact that 54% of respondents didn’t even bother to apply for federal aid, is the fact that half the parents polled in the survey said they didn't apply because they believed their child wouldn't qualify for it. This coincides with the responses from students and recent graduates, 42% of whom reported they didn’t apply for FAFSA because they felt they didn't need it.
But the survey also revealed that these sentiments varied by region. A majority of southern parents (62%) skipped federal aid applications because they didn’t believe their child could qualify for it, compared to just 38% of parents in the West. As for current students or recent graduates, those in the Northeast were the most confident in their ability to pay for college without federal aid, compared to just 25% in the West.
Interestingly, our own study indicates that northeastern states received the most federal aid per recipient ($11,218), while western states had the lowest ($9,876). This discrepancy between the general feelings toward the FAFSA and the actual amount it pays out shows that completing the application is worthwhile for everybody.
“Filling out the FAFSA is a critical step in the college financing process since schools use it to determine eligibility for federal, state and institutional aid, including grants and scholarships,” said Nicole Straub, vice president for Discover Student Loans. “The FAFSA becomes available October 1, and families should plan to fill it out every year a student is in school, even if they feel they won’t qualify or don’t need the aid, because most people will be eligible for some aid.”
Apply for the FAFSA with your child
Even when parents do submit the FAFSA for their child, many aren't making the student a part of the process. According to the survey, 43% of parents with students in or recently graduated from college reported that they or another parent filled out the FAFSA alone.
While the FAFSA application forms may seem complex, and you may find it easier to just fill them out on your own, involving your child in the process actually serves a crucial purpose: helping your child understand the financial implications of student loans. In a country where the average student debt has reached $32,731, and total student loan debt has increased by more than 300% since 2004, fostering this understanding early in the education process is critical.
“It’s important for parents and students to communicate early and often about paying for college, and the FAFSA should be a part of those conversations,” said Straub. “If families work together to fill out the FAFSA, review their award letters and create a plan to pay for college, it can minimize any surprises and help everyone understand their future financial responsibilities.”