Millions of college students are passing up the opportunity for financial aid.
About half of undergraduates enrolled in the 1999-2000 academic year, or about 8 million students, did not submit the Free Application for Federal Student Aid form, according to an American Council on Education study released in October of the latest available data.
The FAFSA is the standard application used by the federal government and most universities to award financial aid, and experts can't pinpoint why the application rate isn't higher. It's especially puzzling considering that nearly 70 percent of those who do fill out a FAFSA get some kind of free financial aid.
"Twenty-five percent of the lowest-income students didn't file a FAFSA," said Jacqueline King, director of the council's Center for Policy Analysis and author of the study "Missed Opportunities: Students Who Do Not Apply for Financial Aid." "It's hard to believe that they felt they didn't need it."
The study found that students attending community colleges or attending part time were more likely not to complete a FAFSA. And about 23 percent of those who did not fill out the FAFSA in 1999-2000 lined up alternative funding, including aid from their parents' employers, scholarships, private grants or loans.
The College Board, a not-for-profit association of schools, universities and educational organizations, found that 56 percent of financial aid came from loans and 38 percent from grants. The remaining 6 percent came from work and education tax benefits.
Full-time equivalent students who got any kind of aid receive an average of nearly $4,000 in various grants, according to the College Board. Many families may equate filling out the FAFSA with being cash-strapped, but financial-aid experts urge you to take the time to fill it out regardless of your income.
When you fill out the FAFSA, "all you are doing is letting the institution know you need help going to college," said Terri Shaw, chief operating officer of the U.S. Department of Education's Federal Student Aid office. And who couldn't use help, particularly if it's money you don't have to repay? The FAFSA opens the door to federal, state and institutional aid in the form of scholarships, loans and grants. The College Board found that half of all grant aid, which is not always need-based, came from institutions.
The FAFSA is used to determine eligibility for the federal Pell Grant, a need-based program that provides money to low-income undergraduate and some postgraduate students, but it is also the application for other monetary aid. The highest Pell award for the 2003-2004 academic year was $4,050, while the lowest was $400.
Your application goes to a federal processor, who passes it along to financial aid departments of your designated universities. From there, you'll be considered for state and institutional need-based aid.
Most merit-based awards, such as scholarships, don't rely on the FAFSA, said Christopher Hooker-Haring, dean of admissions and financial aid for Muhlenberg College, a four-year private school in Allentown, Pa.
The federal government doesn't sell or share your FAFSA information, so you shouldn't be bombarded by loan solicitations from outside sources unless you agree to have your information shared with private lenders.
"Lots of families just incorrectly assume, `My income is too high, so why bother filling out all this paperwork,' " Hooker-Haring said. "It all depends upon the cost of the college that the child is going to attend."
A high-income family with a student attending community college may not qualify, but an upper-middle-income family sending a child to a high-cost private school might.
You can do an expected family contribution estimate by plugging your financial information into an online calculator, such as the one found at www.collegeboard.com.
If your expected contribution is higher than the total cost of attending college, which is the total of tuition, fees, room, board and books, you probably won't qualify for need-based aid. But if it is lower than the cost of attendance, fill out that FAFSA as soon as possible.
Father loses job
With a combined annual income of $125,000, Patty Stern of Fairfield, N.J., didn't think she and her husband would get any financial aid to send their only child to Pace University in New York. But they filled out the FAFSA anyway.
"I thought I was going to be paying about $32,000 a year," she said.
After scholarship application deadlines had passed, her husband lost his job, and the family income dropped to $70,000.
With the help of College Service Center in Madison, Conn. - she paid about $400 for its financial aid consulting services - she wrote a letter explaining how things had changed since filing the FAFSA.
Pace University gave her daughter $13,000 in scholarships and $3,200 in need-based aid.
"It was well worth it," Stern said of filling out the FAFSA.
Lorene Yue is a Your Money staff writer.