When should I file the FAFSA?
Provided By: Duane J. Silbernagel, CFP®
The FAFSA, which stands for Free Application for Federal Student Aid, is the federal government’s financial aid application. The FAFSA is a prerequisite for federal student loans, grants, and work-study. In addition, colleges typically require the FAFSA before distributing their own need-based aid and, in some cases, merit-based aid.
For the 2020-2021 school year, the FAFSA can be filed as early as October 1, 2019. Whether you have a senior in high school or a returning college student, it’s a good idea to file the FAFSA as early as possible to increase your child’s chances of getting financial aid, because some aid programs operate on a first-come, first-served basis. (For high school seniors who haven’t yet been accepted at a particular college, you can list all the schools your child has applied to on the form.)
The 2020-2021 FAFSA relies on your family’s current asset information and two-year-old income information from your 2018 tax return. The form is available online at fafsa.ed.gov. In order to file the form, you’ll need to create an FSA ID if you haven’t done so already (be sure to follow the online instructions). You can save time and minimize errors on the FAFSA by using the built-in IRS Data Retrieval Tool, which electronically imports your tax data.
Even if you don’t expect your child to qualify for need-based aid, you still might consider submitting the FAFSA. All students attending college at least half-time are eligible for federal unsubsidized Direct Loans regardless of financial need. So if you want your child to take out a loan (or your child needs to do so), you’ll need to file the FAFSA. (Unsubsidized Direct Loan amounts are capped each year: $5,500 freshman year, $6,500 sophomore year, and $7,500 junior and senior years.)
Keep in mind that you’ll need to resubmit the FAFSA each year that you want your child to be considered for aid. Fortunately, renewal FAFSAs take less time to complete.
How can I teach my high school student the importance of financial literacy?
Even though your child is just in high school, he or she may still have to deal with certain financial challenges. Whether this involves saving for an important purchase like a car or learning how to use a credit card responsibly, it’s important for your high schooler to have a basic understanding of financial literacy concepts in order to manage his or her finances more effectively.
While financial literacy offerings in schools have increased in popularity, a recent study reported that only 17 states require high school students to take a personal finance course before they graduate.1 Here are some ways you can teach high school students the importance of financial literacy.
Advocate saving. Encourage your children to set aside a portion of any money they receive from an allowance, gift, or job. Be sure to talk about goals that require a financial commitment, such as a car, college, and travel. As an added incentive, consider matching the funds they save for a worthy purpose.
Show them the numbers. Use an online calculator to demonstrate the concept of long-term investing and the power of compound interest. Your children may be surprised to see how fast invested funds can accumulate, especially when you match or contribute an additional amount each month.
Let them practice. Let older teens become responsible for paying certain expenses (e.g., clothing and entertainment). The possibility of running out of their own money might make them think more carefully about their spending habits and choices. It may also encourage them to budget their money more effectively.
Cover the basics. By the time your children graduate from high school, they should at least understand the basic concepts of financial literacy. This includes saving, investing, using credit responsibly, debt management, and protection planning with insurance.
1 Survey of the States, Council for Economic Education, 2018
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Duane Silbernagel is a Financial Advisor in Lincoln City, Oregon offering securities through Waddell & Reed, Inc., Member FINRA and SIPC. He can be reached at (541) 614-1322 or via email at DSilbernagel@wradvisors.com.
This article is meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. The article was written by an independent third party, Broadridge Investor Communication Solutions, Inc. (Copyright 2019) and is provided for informational and educational purposes only. Waddell& Reed is not affiliated with www.newslincolncounty.com website and is not responsible for any other content posted to this website. (09/19)