Every college-bound person and/or their parents need to know how the Free Application for Federal Student Aid (FAFSA) process works. Some may dismiss the idea of applying for financial aid for college because they think they make too much money to qualify. But regardless of their family earnings, they may be eligible for some form of financial assistance, including federal, state, and school-based aid as well as merit-based scholarships.

In fact, it makes sense for almost all families with a college-bound kid to fill out the FAFSA.

KEY TAKEAWAYS

  • Most families are eligible for some form of federal financial aid for college.
  • Students with exceptional financial need may be eligible for federal grants and subsidized loans.
  • Other students and parents may be eligible for non-need-based aid, such as unsubsidized federal loans.


How Does FAFSA Work?

The primary purpose of the FAFSA is to determine how much financial aid a student qualifies for, including both need-based and non-need-based aid. It determines eligibility for federal need-based grants, including the Pell Grant and Federal Supplemental Educational Opportunity Grants (FSEOG); subsidized federal student loans, which are based on need; unsubsidized federal student loans, which most students qualify for regardless of need; federal work-study; state-based financial aid, including grants, scholarships, and loans; school-based financial aid, including need-based grants and scholarships; and school-based merit aid (since many schools require the FAFSA to be on file before any aid awards are distributed).

To determine a family's financial need, the FAFSA asks a series of questions about the parents' and student's income and assets as well as other factors, such as how many children there are in the family. It then comes up with a Student Aid Index (SAI).1

The confusingly named Expected Family Contribution (EFC) was renamed the Student Aid Index (SAI) for the 2024–2025 school year forward to clarify its meaning. It does not indicate how much the student must pay the college. It is used by the school to calculate how much student aid the applicant is eligible to receive.23



In addition to changing the name, the transition to SAI will also change the formula a bit. Parental income was once divided if they had more than one child in college at one time. Now, each child's SAI will use the same amount of parental income information, whether they are supporting multiple children in college or not.4

The FAFSA is the official form that students or their families use to apply for financial assistance for college from the federal government. States, individual colleges and universities, and private scholarship programs rely on the information provided in the application as well.