Financial Freedom Insights: Issue 6

Filling Out the FAFSA Form

What Does FAFSA Aid Look Like?

Students typically receive grants or loans. A grant is free money that you don’t have to pay back. A loan is, as we all know, money that you borrow and pay pack with interest once you finish school. Some schools also offer “work-study,” which is a part-time job arranged through your school to help cover costs.

Why the Middle Class Loses Out Because of the FAFSA Aid Calculation

As you may have noticed, the way that the SAI is calculated is complex, and the amount of aid offered is rarely enough for families. That’s why so many families take out large loans even with aid.

The SAI calculation looks at assets and income figures from the prior tax year and doesn’t look at current circumstances like recent job losses, medical debt, or the fact that a family might have two or three children approaching college age at once. The result is a number that does not reflect current circumstances.

What does that mean? It means that middle-class families earning between $60,000 and $150,000 per year — can make too much to qualify for aid, yet they don’t make enough to be able to comfortably pay for college. So, they rely on student loans.

The situation is even worse for students whose parents are not willing to engage in the FAFSA process. Students can apply for “dependency override,” but the documentation is a headache, and the result depends on institutional discretion.

COVID Froze Loans but Now Payments Have Restarted

After the COVID-19 pandemic, the federal student loan system was effectively frozen. Payments were paused and interest suspended. However, payments were again due to start in early 2026. Many Americans are now having a portion of their paycheck withheld automatically, without a court order, to repay overdue student loan balances.

Look, we’ve told you that FAFSA basically sucks for the average American, but that’s if you take the traditional route. There are alternative ways to get some funding for your education that are worth considering.

What Can You Do to Get an Education Without Taking on Massive Amounts of Debt?

Some ideas that you might not have thought of include going to community college, finding unusual grants that you might qualify for, and appealing the amount you are awarded by a college.

One option is to study for two years at a community college and then transfer to another college. Classes at a community college are much cheaper, and you can save $30,000 to $60,000. The diploma will state that you graduated from the university, so there’s nothing lost there. You could even work part-time or full-time and take evening classes.

The downsides to this strategy are that not all your credits from the community college might transfer; but check it out as an option.

FAFSA is not the only source of aid. There are also state grant programs and many other institutional and private scholarships you won’t have even heard of unless you Google them.

Community organizations, employers, and foundations offer grants and scholarships. Did you know there were scholarships for being a Post Malone or Miley Cyrus fan? Is there something unique about you, a hobby perhaps, that might qualify you for a scholarship? Local scholarships are often the most overlooked — they have fewer applicants and frequently go unclaimed.

This approach requires work, but a few thousand dollars here and there can make a big difference.

Financial aid offers are not final. If you have received a more generous offer from a school other than your preferred school, you can contact the financial aid office at your preferred school and ask them to reconsider. Don’t be afraid to negotiate.

You can also talk to the aid office at a school and inform them of changes that may have occurred since the tax year that is reflected on your FAFSA — a job loss, a medical emergency, a divorce — you can submit documentation and request a professional judgment review. Many families don’t know that aid offices often do adjust awards when asked.

Maximizing Student Debt

To get the best results from your FAFSA application, and to maximize your aid from other sources, do these four things.

FAQs

1. What is FAFSA and how does it work?

FAFSA stands for Free Application for Federal Student Aid. It is a form that students fill out to apply for financial assistance to help pay for college. The form collects information about a family’s income and assets, which the government uses to calculate a Student Aid Index (SAI). Colleges then use this number to determine what financial aid package a student may receive.

2. What types of financial aid can students receive through FAFSA?

Students who complete the FAFSA may qualify for federal grants, student loans, and work-study programs. Grants do not need to be repaid, while loans must be repaid with interest after graduation. Work-study programs allow students to earn money through part-time jobs arranged by their school.

3. Why do many middle-class families struggle to qualify for FAFSA aid?

The FAFSA calculation sometimes does not take into account the current financial situation of families and relies on the prior year’s tax information. Many middle-class families fall into a financial gap where they earn too much to qualify for substantial need-based aid but not enough to comfortably afford college costs.

4. How can students reduce college costs if FAFSA aid is limited?

Attending a community college for the first two years and then transferring to a four-year university can save tens of thousands of dollars. Students can also search for state grants, institutional scholarships, and private or local scholarships that are not tied to FAFSA.

5. Can students ask a college to reconsider their financial aid offer?

Yes. Financial aid packages are not always final. Students can contact a school’s financial aid office to request a review if their financial circumstances have changed or if they received a more generous offer from another college. Schools often adjust awards if asked.

Sources

[1] The Urban Institute. “Borrowing.” https://collegeaffordability.urban.org/covering-expenses/borrowing/#:~:text=Each%20year%2C%2030%20to%2040,by%20the%20time%20they%20graduate. Accessed March 11, 2026.