Don’t File the FAFSA Until You Read This!

Updated September 25, 2025

On September 24, 2025*, the federal government released the 2026-27 FAFSA (Free Application for Federal Student Aid). As always, you’ll hear plenty of warnings that students and parents need to file right away or risk losing out on financial aid.

It’s true that some aid is awarded on a first-come, first-served basis, and even if you qualify, you could miss out on some money if you apply too late. So filing early is important, but equally important is making sure you’ve taken steps to maximize the financial aid you qualify for before you file. And that starts with understanding the FAFSA itself.

What Is the FAFSA?

The FAFSA is the main financial aid form used by the government and colleges to determine eligibility for need-based financial aid, including federal, state, and college grants, Federal Direct Loans, and Work-Study

But the FAFSA is about more than just need-based aid—it’s also the key to unlocking other financial resources. All students should file the FAFSA—even if family income is high—because:

• You must file to access Federal Direct Student Loans, even if you don’t have financial Need.
• A FAFSA is required if your parents want to borrow Federal PLUS Loans.
• Many college-awarded and outside scholarships require a FAFSA, even for awards that aren’t need-based.
• Most students DO qualify for some form of need-based aid—grants, loans, and/or Work-Study, especially at more expensive schools.
• If your family’s circumstances change mid-year (job loss, medical bills, divorce), having a FAFSA on file allows the college to process a professional judgment review right away. If the review lowers your SAI, you could qualify for more need-based aid that year, including bigger grants and better loan options.

The FAFSA analyzes your income and assets—along with your parent(s)’ if you’re dependent, or your spouse’s if you’re married—to produce a number called the Student Aid Index (SAI). Your SAI represents the minimum amount your family is expected to contribute toward college each year. A lower SAI generally means you qualify for more need-based aid, which can reduce the amount your family actually has to pay. Taking steps to lower your SAI can make a significant difference in your costs.

Your Action Plan to Lower Your SAI

Follow the steps below to get an estimate of how much free money you’re likely to receive. This will help you calculate a Net Price at each college of interest.

Follow the steps below to get an estimate of how much free money you’re likely to receive. This will help you calculate a Net Price at each college of interest.

1. Understand How Your SAI is Calculated
   1. The FAFSA analyzes your family’s income and assets to calculate your SAI. You can, and should, get an accurate estimate of your SAI with the government’s free SAI calculator, the Federal Student Aid Estimator. But if you want to know how to lower your SAI, you need to know what’s in the SAI formula. Our article, Your SAI: What It Is, How It’s Calculated, and Why It Matters, breaks it down for you.
2. Examine Income
   1. Parent income usually has the greatest effect on the size of your SAI, as shown in this infographic.
   2. The FAFSA uses “prior-prior year” income in the SAI analysis (two tax years before the college year for which you’re applying for aid). For example, if you’re entering college in the fall of 2026, your first FAFSA uses income from 2024. Typically, the tax years that count for a 4-year degree are from your high school sophomore year through your college sophomore year.
   3. If you’re entering college in 2026, it’s too late to change your 2024 income, but you can still adjust your income for future FAFSAs.
   4. Ways to minimize reportable income:
      • Avoid capital gains or offset them with capital losses.
      • Increase parents’ pre-tax payroll contributions toward 401k or 403b accounts. (Note: payroll-deducted contributions to traditional IRAs DO count as income on the FAFSA).
      • Until the student completes their sophomore year in college, keep their income below the student Income Protection Allowance (IPA). For 2026-27, that’s $11,770 for 2024 income. Half of every dollar a student earns above the IPA is counted toward the SAI.
3. Examine Assets
   1. Parent Assets
      1. Included:
      2. Savings, checking, stocks, bonds, CDs, business and real estate investments, 529s and Coverdell’s (for which the student is the beneficiary), UTMA/UGMA accounts owned by or for the student, and child support received
      3. Excluded:
      4. The value of retirement accounts, primary residence, life insurance policies, annuities, untaxed student financial aid, ABLE accounts (savings and/or investment options for qualifying people with disabilities)
   1. Reduce Parent Assets Before Filing
   2. If you can afford to, or were planning to anyway, do the following before filing the FAFSA:
      1. Pay down consumer debt
      2. Pay off student loans, mortgages, and medical debt
         
      3. Make large, planned purchases—new roof, car, home renovations, etc.
         
      4. File the FAFSA right before payday to minimize bank balances
         
      5. Use cash assets to maximize retirement savings (Roth IRAs or non-deductible traditional IRAs)
         
   3. Student Assets
      1. Parent Assets
         1. Included:
         2. Savings/checking, savings bonds, other investments, UTMA/UGMA in the student’s name, student-owned 529s
         3. Excluded:
         4. The value of retirement accounts, life insurance policies, primary residence (if the student owns a home), and student ABLE accounts
   4. Reduce Student Assets Before Filing
      1. Use the student’s money to buy things they will need for college (computer, clothing, car, dorm furnishings, braces, books, supplies, tuition for a summer academic program, etc.)
      2. If the student has significant cash reserves, use them to pay tuition and other college bills before using parent money
         
      3. If the student has a job, file the FAFSA right before payday
      4. Contribute student cash to a Roth IRA, if their income permits
         
      5. Use cash assets to maximize retirement savings (Roth IRAs or non-deductible traditional IRAs)
         
4. Know Your Filing Deadlines
   1. You don’t have to file immediately after the FAFSA is released. However, it’s important to file soon after you’ve taken steps to reduce your SAI. If you can make changes before October 1, file your FAFSA promptly once you’re ready. If you need more time, just make sure to file on or before college, state, and federal deadlines to ensure you receive all the aid you qualify for.
   2. Check the deadlines of every college you’re considering and be sure to file before the earliest one. Also note your state’s filing deadline (you can find it here). The federal deadline is much later in the academic year so meeting college and state deadlines keeps you well within the federal deadline.

Not every family can benefit from these strategies, but many can. Note that these strategies are not intended as financial advice. Every family’s financial situation is unique, so it’s essential to carefully review your numbers and consult a financial professional before deciding whether any of these approaches make sense for you.

That said, if you want to maximize your financial aid, two things are true: first, you can’t know how much aid you might be eligible for without understanding how your SAI is calculated; second, any steps that apply in your situation must be completed before you file the FAFSA.

*The legally mandated release date is October 1, but the 2026-27 FAFSA was released early.