Do You Have to Pay Back FAFSA?
FAFSA is a prerequisite to determine whether a student qualifies for financial aid issued by the US Department of Education. FAFSA is one of the most important documents to be filed before you begin your college education. For many first-generation college students, it’s the best way for them to fund their education.
Given the nature of FAFSA, there are certain questions that might pop up on a student’s mind about how it really works. One common question we always hear is, “Does FAFSA need to be paid back?”
In short, NO! FAFSA doesn’t have to be repaid once awarded. The simple reason being that FAFSA is not a loan in the first place. The only financial aid you have to payback is loans. Unlike a student loan issued by a bank, the FAFSA serves a completely different task. It’s an online application that once submitted, helps the US Department of Education determine the kind of student loan a student is eligible for.
What is a Student Aid Report (SAR)?
So once the FAFSA is filled out, the student receives a Student Aid Report which is an acknowledgment of everything that has been filled out by the student. Since the FAFSA is an important document that has direct implications to a student’s college aspirations, the government sends the SAR so that the student can confirm the details he/she filled out in the FAFSA. The SAR also lists the Expected Family Contribution (EFC) which further determines the extent to which the student would potentially need the loan amount.
The EFC Explained
The EFC determines the minimum financial contribution that the family of the student can make. It uses the following formula to determine this figure:
Cost of Attendance (COA) – Expected Family Contribution (EFC) = Financial Need
Since the majority of students are classified as dependents, the EFC assumes the following sources would at least be used to make contributions:
- 22-47% – parent’s income
- 5.64% – parent’s assets
- 50% – student’s income
- 20% – student’s assets
The majority of the financial aid granted by the FAFSA does not need to be repaid. While this may be a sigh of relief for some, it’s important to keep in mind the varying differences between scholarships, loans, and grants.
Grants. Vs. Scholarships vs. Loans
Here is a head-to-head difference between grants, scholarships, and loans:
|What is it?||Financial aid awarded by the government to those in need||Monetary award for students with potential; basically, free money||Borrowed amount to fund education and cater to expenses|
|Payback terms||Only applicable to students hailing from disadvantaged backgrounds||A student must adhere to the scholarship conditions if any||Must be repaid (usually with interest)|
|How to fill out||Only one application i.e. the FAFSA needs to be filled out||No limit to the number of scholarships that can be awarded||Amount issued limited to the collateral a student has and credit scores|
What Financial Aid Do I Have to Pay Back?
Scholarships and grants are the financial aid options that don’t need to be paid back. To reiterate the point made earlier, the FAFSA does not need to be paid back. The same goes for scholarships as they are awarded to students who exhibit exceptional talent in a certain field.
Loans, however, are a completely different story. They do need to be paid back, often with interest, irrespective of the source that it was borrowed from. Subsidized loans are a better bet as they do not accrue interest while the student is in school and they only must be repaid once the student graduates. Student loans are a big problem in the US economy, and they are the only kind of debt that still needs to be paid even if the student declares bankruptcy.
Get FAFSA Help with a UStrive Mentor
Now that you know how complicated it is to fill up a FAFSA, wouldn’t you like to have someone who can guide you through this process? Fret not, as UStrive does just that.
From filling out college applications to assisting students in finding the right career path, UStrive connects students to their own network of mentors who help students at every step of the way. These mentors have the experience of working for some of the top Fortune 500 companies in the world and are now on a mission to delivering legit mentoring sessions to those in need.
At this point in a student’s life, the last thing they would want to worry about their dreams and having a mentor who has done it all can help give them the motivation they need to put in the work and keep ongoing. Visit UStrive to connect with that mentor who has the power to push you in the right direction.
Filling up the FAFSA should not be difficult if you know what you are doing. It does not have to be a cumbersome process and every student should do their research before filling it up. However, if they feel lost, getting the right guidance from someone reliable, say a mentor from UStrive can work wonders for them. It’s all about making the right choices here.