FAFSA Fundamentals: Avoiding Costly Mistakes in Your College Aid Application
Think of FAFSA as one tool in your kit. Used well, it can unlock aid and reduce reliance on high-interest borrowing. Used poorly—or neglected entirely—it can create unnecessary strain on your broader financial plan.
Hello Discerning Parents and Future Graduates,
Today, we delve into another essential chapter in our guide to mastering the financial maze of funding higher education. For all the Jills and Jacks navigating the delicate balance of funding their children's education without jeopardizing their own retirement dreams, this one's for you.
For parents, few acronyms carry as much weight as FAFSA—the Free Application for Federal Student Aid. Completing it correctly can mean the difference between thousands of dollars in grants, loans, and work-study opportunities or leaving money on the table.
Yet every year, families unintentionally undermine their eligibility with minor mistakes. The good news? With the right preparation, you can sidestep these pitfalls and help maximize your children’s financial aid.
Why FAFSA Matters
Even if you think your household income is too high to qualify for need-based aid, FAFSA is often the gateway to merit aid, state programs, and even some private scholarships.
Colleges throughout Nevada, California, and the nation use FAFSA data to determine eligibility for institutional grants, low-interest loans, and work-study programs.
In other words, skipping FAFSA is like skipping the first step of the college funding ladder.
Common FAFSA Mistakes and How to Avoid Them
1. Missing the Deadline
Federal, state, and college FAFSA deadlines vary. Missing them could mean losing access to aid even if you’re eligible. Tracking deadlines is important, especially when applying to multiple institutions. Mark your calendar early and file as soon as possible after FAFSA opens in the fall.
The 2026-27 FAFSA form will be available to everyone by October 1, 2025. In California, the state priority deadline for most financial aid programs is currently April 2 of the application year, with a September 2 deadline for community college students. Meanwhile, Nevada will begin processing the 2026-2027 FAFSA in March 2026.
2. Reporting Income Incorrectly
Parents sometimes include retirement account balances or home equity as reportable assets when they shouldn’t. FAFSA does not count the value of primary homes or qualified retirement accounts such as 401(k)s and IRAs. Accidentally reporting them could make your family look far “wealthier” than you are for aid purposes.
3. Overstating Student Assets
Money held in a student’s name (like savings accounts) is weighed much more heavily than parent-owned assets. Families who shift too many resources into a student’s account may inadvertently shrink their aid package. Strategic asset positioning matters.
4. Skipping the FAFSA Entirely
High-income families sometimes assume FAFSA isn’t worth filing. However, many merit scholarships and some state and institutional aid require a FAFSA on file, regardless of financial need. Filing keeps your student eligible for opportunities you may not expect.
5. Forgetting to List All Schools
Families can list up to 20 colleges on the FAFSA. Forgetting to include a school means that the college won’t see your aid eligibility, and your student could lose out on grants or scholarships tied to FAFSA data.
6. Using Estimated or Outdated Information
The FAFSA now uses a “prior-prior year” tax return (for example, 2024 returns for the 2026–27 school year). Mixing in current-year or estimated numbers can create errors that delay aid or reduce eligibility. Always use the FAFSA’s IRS Data Retrieval Tool when possible for accuracy.
7. Assuming All Colleges Use FAFSA Alone
While FAFSA is the standard, some private colleges also require the CSS Profile, which asks for more detailed financial information (including home equity and small business values). Knowing which form each school requires is essential for accurate planning.
FAFSA Changes Families Should Know
FAFSA Simplification Act Updates. Starting with the 2024–25 school year, distributions from grandparent-owned 529 plans no longer count as student income on the FAFSA. In the past, those withdrawals could reduce aid eligibility by up to 50% of the amount.
Student Aid Index (SAI). The “Expected Family Contribution (EFC)” has been replaced by the SAI, a more straightforward measure of aid eligibility. The SAI is calculated using student and parent income, certain assets, family size, and the number of students in college to estimate aid eligibility.
How FAFSA Fits into the Bigger Picture
FAFSA is not just a form—it’s a cornerstone of a larger college funding strategy. For families with multiple children, you’ll want to balance college planning with your long-term financial goals. Without careful planning, you risk overextending yourself and hurting the family’s finances.
Think of FAFSA as one tool in your kit. Used well, it can unlock aid and reduce reliance on high-interest borrowing. Used poorly—or neglected entirely—it can create unnecessary strain on your broader financial plan.
Bringing It All Together
Avoiding FAFSA mistakes comes down to attention to detail and strategy. Filing early, reporting assets accurately, and staying updated on rule changes helps ensure your family receives the full benefit of available aid.
Working with a fiduciary financial advisor who specializes in families navigating college costs can help you stay on track. An advisor can guide you through FAFSA nuances, position your assets strategically, and create a comprehensive plan so that college planning doesn’t derail your family’s financial well-being.
If you’d like tailored guidance for your family, schedule a free getting-acquainted call.
Yours in planning, always,
Julie Bray
Your Family's College and Retirement Champion
GW Financial, Inc.
This content is developed from sources believed to be providing accurate information and is provided by GW Financial, Inc. It is not intended to be used as investment, tax, or legal advice. The information presented is for general education and informational purposes only and should not be construed as a solicitation or recommendation. Please consult with a qualified professional regarding your specific circumstances.
