Every year, the U.S. Department of Education gives over $120 billion in federal grants, loans and work-study funds to more than 13 million college students, making it the largest provider of student financial aid in the country.
October 1st is the first day that students can fill out the Free Application for Federal Student Aid, otherwise known as the FAFSA, in order to receive their share of these funds for the 2019-2020 school year.
What students may not know is that a large portion of financial aid in the United States is distributed on a rolling basis, meaning the sooner you apply, the better your chances of reviving generous aid.
"October 1st is the day that the FAFSA form opens for the next academic period, and it's a little bit of a first-come-first-served system," Nicole Straub, Vice President at Discover Student Loans tells CNBC Make It. "So we really encourage not only that all families fill out the FAFSA but that they do so right away."
If you're planning to attend college next year, here's why you need to fill out the FAFSA:
Most students qualify
When students do not apply for FAFSA, many revert to private student loans, which often have high interest rates and lack the consumer protections that federal student loans include. The Institute for College Access and Success reports that 47 percent of private loan borrowers could have used more affordable federal loans. By completing the FAFSA form, students can make sure that they are taking advantage of the best student loan options.
Many students choose not to apply for FAFSA because they think that federal college aid is only available for those less fortunate than they are. Cora Manuel, assistant director of financial aid at Saint Mary's College of California, tells NerdWallet, "A lot of parents feel they won't qualify."
But in fact, most Americans are eligible, so if you think you don't qualify, think again.
"Aid is available for anyone with a household income below $250,000 a year," says Charlie Javice, founder & CEO of Frank, an online FAFSA platform. "So it's really important as FAFSA season comes up that people don't forget that there is no such thing as being too rich to file FAFSA."
Javice points out that a vast majority of Americans make less than $250,000. Being too rich "only applies to less than 5 percent of the U.S. population. Everyone should be doing it."
Students are leaving billions on the table
According to the National College Access Network (NCAN), "Ninety percent of high school seniors who complete the FAFSA proceed directly to college, versus only 55 percent who don't complete the FAFSA." The FAFSA completion rate for high school graduates was just 44 percent in 2014.
By not filling out FAFSA, American college students are missing out on a seriously good deal. Federal grants do not need to be repaid, federal student loans have low interest rates and work-study programs can be a convenient way to simultaneously fund an education and build a resume.
NCAN reports that students are leaving billions of dollars of aid on the table each year: NerdWallet estimates that students missed out on $2.7 billion in free FAFSA college aid in 2016.
Situations change
Danny Ruderman, a college admissions expert, confirms that FAFSA should be an important part of every student's application process. He adds that even if you do not receive as much aid as you were expecting, you can always appeal for more FAFSA aid. "Once you submit the FAFSA, be sure to submit supplements or new addendums," he tells CNBC Make It.
This can be particularly helpful if your family's finances have been affected by a recent event such as a parent losing a job or a sickness in the family. The Department of Education allows families to appeal because, he says, "you can fill out the FAFSA in December, and by the time that your child is going [to college] the next fall, things can change."
"Every year situations can change. Just because parents couldn't receive financial aid one year doesn't mean that they couldn't get it another year, if the financial situation has changed."
This is an updated version of a story that appeared previously.
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