The Federal Student Aid Office, a department of the U.S. Department of Education, extends financial aid to financially needy students based on household size, income and assets. To apply, students must complete and remit a free application for federal student aid, or FAFSA. Students must complete the form accurately, correctly listing an inventory of all earnings, income, savings and other qualifying assets, with the exception of retirement, medical and education accounts.
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The FAFSA requires an applicant's family to list all income, including information from previous tax years. The family must include information about investment accounts, bank accounts and trust funds. Additionally, if an applicant's family owns any property, including investment property, outside of the primary residence, the student must list the current market value of the property on the FAFSA. However, the FAFSA also acknowledges any outstanding debt on these properties to determine the net value of a property.
The value of a student's or student's parents' savings in a qualified retirement account is not listed on the FAFSA. This includes traditional IRAs, Roth IRAs and 401k accounts. However, the student must list annual contributions to a traditional IRA as untaxed income. Likewise, the same limitations apply to health or medical savings accounts and other non-taxable income accounts. Additionally, the FAFSA does not consider the value of an applicant's primary place of residence, nor does it recognize the value of the family vehicle, small business, personal possessions or whole life insurance policies.
Students can apply for FAFSA either online at FAFSA.gov or by mail, though the Federal Student Aid Office recommends applying online for the fastest processing time. Online applications are also less likely to contain errors that could affect the amount of financial aid the student may qualify for. Students should allow four to six weeks for processing. When applying, students obtain a personal identification number that allows them to save an application to complete at a later time. The PIN also allows the student to check the status of an electronically submitted FAFSA online or by calling the Federal Student Aid Information Center at 1-800-433-3243.
FAFSA is federally funded, and the U.S. Department of Education allocates benefits on a first-come, first-served basis. It is important for a student to check the federal and state deadlines associated with the FAFSA, as well as any deadlines regulated by his college or university. Failing to abide by these deadlines could result in a denial of financial aid.