Applying for financial aid through the Free Application for Federal Student Aid (FAFSA) is one of the most important steps families can take to reduce college costs.
Yet many students and parents unknowingly leave thousands of dollars on the table each year by making preventable mistakes or overlooking strategies to maximize their aid.
With changes to the 2025 FAFSA form now in effect, it is more important than ever to file early, file accurately, and use a strategic approach to reporting income and assets.
In this article, we break down the essential steps and insider tips families can take to maximize FAFSA aid—ensuring they access the grants, scholarships, and favorable loan options they’re entitled to.
Understand How FAFSA Calculates Aid
FAFSA uses the information you provide to calculate your Student Aid Index (SAI), which colleges use to determine how much financial aid you qualify for.
The SAI replaces the older Expected Family Contribution (EFC), but the principles are similar—it reflects what your family is expected to contribute based on income, assets, and household size.
To get the best outcome, it’s crucial to understand how FAFSA views your finances. For instance, student assets are assessed at a much higher rate than parent assets. Knowing this alone can help families plan their savings and investments strategically.
Learn more about how assets affect financial aid.
File the FAFSA Early—and Accurately
The FAFSA opens each year in the fall. For the 2025–26 academic year, the application launched in December due to updates related to the FAFSA Simplification Act. While later than usual, future cycles are expected to return to an October release.
Why does timing matter? Many states and schools distribute financial aid on a first-come, first-served basis. Filing as early as possible boosts your chances of receiving grants, work-study funds, and other aid before it runs out.
Also, double-check every entry before submitting. Inaccurate or incomplete information could result in delays or worse—being selected for verification.
Use Strategic Asset and Income Reporting
Some assets are excluded from FAFSA calculations, such as home equity in your primary residence, qualified retirement accounts (401k, IRA), and life insurance policies.
But other types of savings and investments—like checking accounts, college savings plans (like 529s), and brokerage accounts—must be reported.
Key strategies include:
- Keep student-owned assets low: FAFSA assesses student assets at a rate of 20%, significantly higher than the 5.64% assessment rate for parent-owned assets. Consider moving funds from student accounts into a parent’s account before filing, where permissible.
- Spend down assets strategically: If you’re holding significant cash in savings or investment accounts, consider paying down high-interest debt, making necessary home repairs, or purchasing essential items (such as a car or computer for school) before filing. These reduce reportable assets without harming eligibility.
- Understand the treatment of 529 plans: Parent-owned 529 plans are treated as parent assets, which is favorable. However, if a 529 plan is owned by a grandparent or non-custodial relative, distributions may be treated as untaxed income to the student, which could reduce future aid. New FAFSA rules starting in 2024–25 simplify some of this, but timing still matters.
- Minimize reportable income: Avoid realizing capital gains or taking one-time income distributions (e.g., Roth IRA conversions, bonuses) during the base year used for FAFSA, as it may inflate your income and reduce aid eligibility. Remember, FAFSA uses prior-prior year income—so the tax return from two years ago.
- Leverage tax strategies: Consult with a tax advisor to explore ways to legally reduce adjusted gross income (AGI), such as making contributions to tax-deferred retirement accounts or health savings accounts (HSAs), which are not counted as assets and may lower reportable income.
The goal is to legally present your financial situation in the most FAFSA-favorable light without misrepresenting facts.
Report Special Circumstances (If Applicable)
If your financial situation has changed significantly since the tax year reflected on your FAFSA—due to job loss, divorce, death in the family, or high out-of-pocket medical expenses—you may be eligible for additional aid through a process called professional judgment.
Colleges have the discretion to adjust the data on your FAFSA to better reflect your current circumstances. These changes can lead to a lower Student Aid Index (SAI) and potentially more financial aid.
Steps to take:
- Contact the financial aid office at each school where the student is applying or enrolled. Each institution has its own process and documentation requirements.
- Prepare a detailed letter explaining the change in circumstances, including dates, impact on income, and why the adjustment is necessary. Be specific and factual.
- Provide documentation, such as termination letters, medical bills, recent pay stubs, or a death certificate. The more thorough and timelier the documentation, the stronger your case.
- Follow up regularly to confirm receipt and to ask whether any additional information is needed.
Examples of valid circumstances for a professional judgment review:
- A parent loses a job after the FAFSA is submitted
- Medical expenses not covered by insurance
- Divorce or separation of the student’s parents
- A one-time income event (such as a severance package) inflates income for the FAFSA year
Keep in mind: The financial aid office’s decision is final, and not all appeals are granted. But submitting an appeal gives you a chance to present a fuller financial picture.
Understand the 2025 FAFSA Changes
The redesigned FAFSA form for 2025 is shorter and more user-friendly—but it also brings major changes to how aid is calculated:
- Fewer questions: Streamlined from 108 to about 36.
- Elimination of the sibling discount: Multiple children in college no longer lowers your SAI.
- Required IRS Data Exchange: Tax info is now imported directly, reducing errors.
These changes can significantly impact aid eligibility, especially for middle-income families with multiple college students.
Don’t Forget State and Institutional Deadlines
FAFSA is the gateway, but many states and schools require additional forms and have separate deadlines for aid consideration. New Jersey, for example, requires the FAFSA be filed by April 15 for TAG grants.
Always check:
- Your state’s higher education agency website
- The financial aid pages of each college on your list
Use FAFSA to Unlock Additional Aid Opportunities
Filing FAFSA isn’t just about federal aid—it’s also required for many:
- State grants
- Institutional scholarships
- Work-study programs
Colleges often use FAFSA data to award their own aid, even for merit-based scholarships. Submitting it—even if you think you won’t qualify—can unlock thousands in “non-need-based” awards.
Review Your SAR and Correct Errors Promptly
After submitting the FAFSA, you’ll receive a Student Aid Report (SAR). Review it carefully for accuracy. If something’s wrong—like a misspelled name or incorrect income—log in and make corrections immediately.
Failure to update errors can result in lower aid offers or eligibility issues later.
Refile FAFSA Every Year—and Keep Good Records
FAFSA must be filed annually to remain eligible for aid. Keep a folder with:
- FSA ID login details
- Copies of tax returns
- Records of assets and bank accounts
This makes it easier to refile and update your information each year.
Partner With a Trusted Advisor
Navigating FAFSA is more complex than ever—especially with the 2025 updates. A college planning professional like CBRG can help you:
- Complete the FAFSA and CSS Profile accurately
- Appeal aid decisions when appropriate
- Maximize both merit- and need-based aid
Thousands of families have relied on CBRG’s expertise to reduce college costs and make smarter decisions.
Be Proactive, Be Informed
The most important tip for maximizing FAFSA aid is simple: start early and get expert help. Don’t assume you make too much to qualify. With the right strategy, nearly every family can reduce their out-of-pocket college costs.
If you’re ready to take the next step, contact College Benefits Research Group for a personalized consultation
Your Next Steps!