retirement

Do yourself a favor and fill out the FAFSA

Tuesday, Feb. 9
Posted 11 a.m. EST

It's that dreaded time of year when college students -- or in many cases, their parents -- take time out of their hectic schedules to fill out the FAFSA form. For the uninitiated, FAFSA is an acronym for Free Application for Federal Student Aid.

And apparently a lot of people are uninitiated. Nearly one out of four families with college-age children (24 percent) did not complete the FAFSA form last academic year, according to a recent study from Sallie Mae and Gallup. Half said they didn't know about it or they didn't think they would qualify for aid.

Maybe some families are discouraged because in previous years their expected family contribution, the amount they're supposed to fork over for education, was so high that they assume they won't qualify for free grant money.

Well, that may or may not be true, depending on the circumstances. But the chances of getting grant money are much better than they've been in a long time. Last summer, the federal government substantially expanded its Pell Grant program as well as two merit-based programs. Plus it doled out cheaper subsidized federal loans. Bankrate's story on financial aid perks goes into detail about the government's largesse.

The FAFSA advantage

Students who fill out the FAFSA are far better off than those who rely exclusively on the private sector for loan money. Federal loans generally come with better terms and borrower protections than private student loans, which play by a different set of rules -- the Wild West kind. Students who fill out a FAFSA qualify for federal loans without having to jump through hoops. But to get a private loan, they either have to have a decent credit score or a co-signer or both. And the loan terms can get onerous over time if they run into financial trouble.

Here's an incentive to investigate the FAFSA further: Sallie Mae, the biggest student lender out there, is offering a total of $10,000 in college scholarships to three lucky winners who enter a drawing on its Web site. OK, so the chances of winning the money are probably minuscule. But hey, it's worth a try.

Students and their parents can also pose FAFSA-related questions to experts or join a live chat this Thursday, Feb. 11, from 9 to 10 p.m. EST at SallieMae.com/FAFSA. Experts will be accepting questions submitted via Twitter and Facebook as well.

Questions? Comments? E-mail boomerbucks@bankrate.com.

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