Easy Access To College Debt: A Gift Or Curse?
[Updated for the 2025-2026 school year on November 26, 2024.]
For those seeking financial aid to pursue their higher education dreams, the U.S. Department of Education’s Free Application for Federal Student Aid (FAFSA®) makes it relatively easy to apply for federal and state, and many institutions’ financial aid opportunities in a single session. This “one-stop shopping” certainly beats submitting separate applications to multiple sources.
The sooner you apply for FAFSA, the more likely your efforts will pay off.
While you are generally required to submit your FAFSA application for the next academic year by next July, you are permitted to do so any time THIS year. If you’re busy with a million other things – and who isn’t? – you might be tempted to let your application slide until, say, after the holidays or until closer to next July. We caution against doing so.
As reported by SavingforCollege.com publisher and VP of Research Mark Kantrowitz,
“Students who file the FAFSA [early] tend to get twice as much grants, on average, as compared with students who file the FAFSA later.”
This caveat applies to the federal level on down. “While federal student loans and the Federal Pell Grant function like an entitlement, federal campus-based aid is more limited,” says Kantrowitz. For example, federal funds for work-study programs and other opportunities come from a single “pie,” which can end up being consumed before latecomers arrive at the table.
In addition, many states operate on a first-come, first-served basis. These states usually begin granting their awards after October 1, until the funds are gone. Other states have application cut-offs earlier than June 30, again warranting a timely FAFSA application to qualify for their funds.
You can look up requirements for other states here. Similarly, individual colleges may have earlier deadlines to be given “priority consideration” for their financial aid funds.
When to Apply?
While the federal deadline for the application for the upcoming 2025-2026 academic year is June 30, 2025, you can usually submit your FAFSA application any time after October 1, 2024.
However, the FAFSA has been extensively redesigned for the 2025-2026 school year. Changes continue to be made, leading to an unclear timeline for when the new FAFSA will be available to file. Our best guess is to plan for the FAFSA to be available on December 1st each year. [Update: The FAFSA for the 2025-2026 school year was made available on November 21, 2024].
For the best chance at claiming your slice of the pie, aim to submit your FAFSA as soon as it opens.
A Look at the Simplified FAFSA
Families with multiple students in college may receive less aid.
If you have filled out the FAFSA before, you may notice a few changes starting with the 2024-2025 application thanks to the FAFSA Simplification Act.
Among them, the formula used to determine need-based aid has changed from the "Expected Family Contribution (EFC)" to the "Student Aid Index (SAI)". Along with the name change came a few minor tweaks to the calculations, and one big change for families with multiple students enrolled.
The EFC (now the SAI) estimates the dollar amount you could theoretically provide for higher education costs. The gap between the estimated amount a family can provide toward education (EFC/SAI) and the school's cost of attendance is how need-based aid is determined. In general, the bigger the gap, the more likely you are to receive funding and the more funding you are eligible to receive.
Under the old system, the amount a family could provide toward education costs was evenly split between the number of students in the household. For instance, if a family had an expected family contribution (EFC) of $20,000 and two students enrolled, the EFC would be split between the students in the household. Each student would have an EFC of $10,000.
Under the new Student Aid Index (SAI) system, the amount a family could provide toward education costs will no longer be split between the students in the household. Each student will incur their own independent amount that a family is expected to provide. Continuing with the example above, instead of each student having an EFC of $10,000, each of the two students will have an SAI of $20,000.
Since the family is expected to provide more toward education costs, they have less of a potential funding gap, leading to less eligibility for aid. For example, if the school’s cost of attendance were $25,000 per year, each student in the above example would have a funding gap of $15,000 under the old system but only $5,000 under the new system.
Changes to College Aid
Student loan payments are set to resume.
For those who have finished their higher education endeavors and took out student loans to do so, payments are set to resume shortly.
The pause on student loan interest accrual has ended as of September 1st, 2023, with the first payments due in October 2023. To find out more information about your specific loans, contact your loan servicer, which can be found by logging in to studentaid.gov.
New repayment plan (SAVE)
The Department of Education also replaced the “Revised Pay As You Earn” (REPAYE) repayment plan with the new “Saving on a Valuable Education” (SAVE) plan, which offers lower monthly payments. You can compare all federal student loan repayment options here.
Next steps
In short, this is one window of opportunity worth leaping through as soon as it opens.
To hit the ground running, you don’t even need to wait to obtain or renew your FSA ID, which will facilitate completing your FAFSA application as soon as possible.
Before we wrap, we’ll add one more caveat from the Department of Education’s FAFSA application instructions. As the DOE emphasizes:
“One thing you don’t need for the FAFSA® form is money! The FAFSA form is FREE, so if a website or mobile app asks you to pay to fill it out, you’re not dealing with the official FAFSA site or the official myStudentAid app.”
In today’s climate of heightened security risks, that’s a critical point. Please let us know if you could use additional assistance as you plan for your own or your children’s higher education funding. Given the costs involved, a well-crafted strategy can pay for itself many times over.
To learn more about the work we do with clients at Open Window, reach out at (775) 827-0670 or schedule some time with us at www.openwindowFS.com/connection.