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11 Common Financial Aid Mistakes and How to Avoid Them

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Common Financial Aid Mistakes to Avoid

Garnering financial aid can help you drive down your college costs. Student aid dollars primarily come from the federal government and directly from colleges that students attend.

Completing the financial aid application, FAFSA, is how you access federal grants, student loans and work study, state based aid, as well as institutional aid for many schools.

Making mistakes in applying for financial aid can definitely slow you down and cause you to miss out on more money to pay that college bill.

Here are some of the most common financial aid mistakes to be aware of and avoid.

1. Missing Deadlines

College planning can easily turn hectic and stressful. You’ll need a greater focus on time management throughout the process, including for submitting the FAFSA (Free Application for Federal Student Aid.)

Typically, you’ll complete the FAFSA as early as the fall of the year before college begins, and annually thereafter for each subsequent year of college. Schools will utilize FAFSA in shaping your admissions letters and financial aid awards.

FAFSA opens October 1 every year and remains open until June 30th of the next year.

States and schools also have their own deadlines for aid applications so you’ll want to keep those in mind as well.  In some states, financial aid is given on a first-come, first-serve basis. Once the money runs out, you’ll have lost your chance for that year and will need to look into other college financing solutions.

It’s also worth noting that with something as complicated as a financial aid application, there can easily be mistakes or issues that cause delays. If this happens, you want to be sure that you have a reasonable amount of time to get everything in order and re-submitted.

2. Not Setting Up an FSA ID in Advance

The FSA ID is the username and password you create in order to access the FAFSA electronically.

When you first set up your FSA ID, you might have to wait up to 3 days until you can actually sign your FAFSA form with it electronically. This might not seem like a huge delay, but in a squeeze, it can make a difference or at a minimum, slow your momentum.

If a student is considered a dependent student, both the student and a parent will need individual FSA IDs.

When starting an application, you should always do so using your FSA ID. Doing so will automatically load certain details such as your name, date of birth, social security number, etc. This can speed up the process by avoiding errors, and you won’t have to enter it again when you sign back in or transfer your tax information from the IRS.

3. Missing or Incorrect Information

FAFSA provides full instructions explaining what information you need to include. However, a lot of specific details need to be in your application, so don’t rush it. Take the time to ensure you’ve placed all the correct information in the right boxes. And, all boxes should have information in them, even if it’s a zero.

Something that people often slip up on is social security numbers, by transposing numbers for example. So, you definitely want to double-check your entries. Additionally, your social security information must be correct with the Social Security Administration before FAFSA can be submitted.

4. Overlooking Helpful Resources from Student Aid

Completing FAFSA can be challenging and you might need some help. You can look up other sources online, but information that doesn’t come directly from Federal Student Aid may be inaccurate.

The Student Aid website has a help center with plenty of resources that can help guide you through the whole process as well as a contact form at the bottom. This is the best place to get answers to any questions you have, and you can get assistance via email, phone, or live chat.

5. Including Retirement Assets

The FAFSA excludes the account balances for retirement assets such as 401(K)s, IRAs, pension plans and annuities. Make sure to leave out these account balances, otherwise you will overinflate your total assets, which will reduce potential aid amounts.

(Although retirement plan balances are not included as an asset in your aid calculation, FAFSA does include retirement plan contribution amounts in your income for calculating aid eligibility.)

6. Including Financial Information for Both Parents When They are Divorced or Separated

You’ll want to keep up-to- date on this one, as FAFSA rules are changing.

As of 2022, if the parents of a student are divorced or separated, completion of the FAFSA is only required for the custodial parent—defined for FAFSA purposes as whichever parent the student lives with most of the year. There’s no need to report the non-custodial parent’s financial information.

However, upcoming changes to FAFSA, currently set for the academic year 2024-2025 (which includes family financial information from base year 2022) will require reporting of financial information for the parent that provides the most financial support, regardless of where the student lives.

7. Assuming You Can’t File the FAFSA Without a Completed Income Tax Return

People often wait until after they’ve completed their taxes to complete the FASFA. You can do the FASFA earlier, using an estimate of your taxes. Sometimes this is necessary to make sure the application is completed before the deadline.

Keep in mind, the income included in FAFSA each year will actually be from your tax return filed two years ago – the prior-prior year.

You should make sure you know what the deadlines are for both state aid and institutional aid. Complete your application well before these, and once your tax return is complete you can update the details on the FAFSA. This is easy to do using the IRS data retrieval tool.

8. Passing On Work-Study

Part of the FAFSA asks whether or not a student is interested in a work-study program. Having a part-time job while at college can help in covering some costs. By not selecting this option, a student could miss out on a very useful opportunity.

There’s always the possibility of finding part-time work off-campus, but depending on where the college is located, this could be more difficult than being on campus.

By registering an interest in the work-study program, a student may be able to earn some spare cash to spend during the school year.

9. Using the Wrong Website

When filing the FAFSA, the Free Application for Federal Student Aid, it should only be done directly through the official government website

Federal Student Aid, an office of the U.S. Department of Education, administers FAFSA. The official application can be found at

If you’re asked for any credit card information at any stage during the application process, you’re definitely in the wrong place.

10. Not Renewing the FAFSA

So, you’ve organized everything, filled out the application, and secured the financial aid – great! But it’s not quite as simple as doing it once and then not having to worry about it again. People often think that if they’ve done the FAFSA once, it will cover a student’s entire time at college.

In reality, doing the FAFSA will only provide aid eligibility for one year. For every year that a student needs financial aid, you’ll need to renew the FAFSA.

When renewing, some of the FAFSA details will be prepopulated to save you time, but there are details you’ll need to add to make sure everything is up to date. You can also start from scratch if you so choose.

11. Not Completing the FAFSA

This might seem obvious, but it’s surprising how many people don’t complete the FAFSA, usually because they’ve misunderstood something. A typical example is that people assume they won’t be eligible for financial aid because of their household income, but there’s no actual income cut-off.

Sometimes people don’t complete the FAFSA simply because it’s too confusing or takes too long. If you do this, you’ll be missing out on aid that could prove far more helpful, making the process worthwhile. If need be, you can get assistance with the FAFSA by visiting the Student Aid website.

Note that the FAFSA isn’t just for one type of financial aid. It includes the Federal Pell Grant, federal student loans, Federal Work-Study funds, and various other grants/scholarships that may be offered by specific states, schools, or organizations. If you don’t fill out the FAFSA you’ll be losing the opportunity to receive money to help with paying for college.

Avoiding Financial Aid Mistakes

If more money for college is a goal for your family, then tapping into more financial aid is an important step in your planning.

Completing the FAFSA is key to the financial aid process. It can be a challenge to understand which may lead you to make mistakes that slow down your application progress or cause you to miss out on receiving more aid all together.

Reduce your chances of making mistakes by staying on top of financial aid requirements and timelines, keeping your financial information organized and getting help when needed.

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