File FAFSA early, and think carefully about college borrowing

File FAFSA early

Parents of high school and college students once again face the difficult task of filling out the FAFSA — the Free Application for Federal Student Aid. The process starts on Oct. 1, and since the “early bird” gets first crack at some scholarship aid and state-specific financial assistance, there’s every incentive to get going right now.

Even if you think your family won’t qualify for financial aid in any form, the FAFSA form is required for many scholarships and other financial programs, including state aid. And it might even help you appeal for merit aid — discretionary money that schools use to lower the cost of attendance if they really want to enroll your student.

The forms are complex, as you’ll see when you start the process at There’s supposed to be a FAFSA simplification for the 2023 school year. In the meantime, get a streamlined version with online chat help at, a new service which is also available through private lender

Getting money for college

Federal student loans are available to all students regardless of need, though you must file FAFSA to get them. The most popular are Stafford Loans. You must apply for a new loan each year, at the then-current rate, which is fixed for the life of the loan. (For the 2021-22 year the rate is 3.73%.)

For the 2021-22 school year, dependent undergraduates can get $5,500 as freshmen (including up to $3,500 subsidized); $6,500 as sophomores (including up to $4,500 subsidized); and $7,500 as juniors and seniors (including up to $5,500 subsidized).

The word “subsidized” means that students who demonstrate financial need on the FAFSA do not have to pay interest while they are full-time students. Unsubsidized federal Stafford loans (made to students who cannot demonstrate need) start accruing interest from the date of disbursement. For more information on these loans and other federal student loan programs, go to

There is one other type of Federal student loan — PLUS loans for parents. These loans carry the highest rates and additional fees, which make them among the most expensive ways to borrow for college.

Filling the gap

When a student is accepted, they will be offered a financial aid package based on FAFSA. In addition, the school may offer other programs such as work/study or even scholarships and grants. As well, many schools offer “merit aid” to reduce the family’s overall cost. Many colleges are now struggling to enroll students to fill their classrooms in this post-pandemic year, so they are offering these tuition discounts.

But there may still be a gap between what the school offers (including federal student loans) and what the family has saved for college. And that’s where you wade into dangerous financial territory — the world of private student loans, which typically carry higher rates and require a credit check and a cosigner.

Alternatives include using home equity — but interest on mortgage money used to pay for college is not deductible. Many parents do take out a Plus loan, or they cosign for a private student loan offered by companies like Sallie May and Discover. Then every year they take out more loans and wade deeper into this quicksand, destroying their own retirement.

Stop and consider

Now is the time to compare the real cost of this college education and to make decisions with huge long-term implications. Is it worth it to go into so much debt for your college degree? Is a degree from this school really worth the extra burden of debt? To view the total long-term burden for both students and parents, use the loan repayment calculators at

You hear a lot about college grads buried in debt but less about the fact that the IRS garnishes up to 15% of an individual’s monthly Social Security benefit if the student loan cosigned by the parent is not repaid. Financial aid sounds like a helpful benefit, but it can be a huge burden over the years.

So, yes, it’s time to file FAFSA for help with the cost of college. But it’s your responsibility — parents and students — to calculate the true costs and to consider the alternatives.