Definition
The Free Application for Federal Student Aid, the form students and families file each year to qualify for federal grants, work-study, and federal student loans. Colleges and many states also use it to award their own need-based aid. It asks for income and asset information from the student and, for dependent students, the parents.
Why it matters
Skipping the FAFSA leaves money on the table: some grants require it, federal loans carry stronger protections than private ones, and many schools will not award institutional aid without it. How savings are held, in the parent's name versus the child's, changes the expected family contribution.
Example
A family with $90,000 of income and $30,000 in a parent-owned 529 plan files the FAFSA. Parent assets count for only a few percent in the aid formula, so the $30,000 reduces aid eligibility by under $2,000; the same $30,000 held in the student's own name is assessed several times more heavily and could cut aid by roughly $6,000.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.