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Does FAFSA Money Run Out?

FAFSA funds don’t run out, but there are a couple deadlines borrowers don’t want to miss. Early submission may also mean additional student aid.

Written By: Michael P. Lux, Esq.

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The Free Application for Federal Student Aid (FAFSA) has been the subject of many misconceptions. Perhaps it is due to insufficient financial aid guidance from colleges and high schools. It could also be due to its nature as a government service. The government generally doesn’t respond as quickly as private companies to correct misperceptions and mistakes.

Whatever the reason, there are several common errors people make with regards to the FAFSA. These errors can lead to significant financial repercussions. While I have previously addressed many of the FAFSA myths, new questions always arise.

A recent inquiry I received was whether FAFSA funds could run out. The answer is a bit complex. Technically, the answer is no, but it’s still crucial for students to submit their FAFSA applications as early as possible

Why the FAFSA doesn’t run out

The FAFSA is essential to accessing federal grants, student loans, and work-study programs. Despite the government setting relatively late deadlines for FAFSA submission, there’s often concern about the availability of funds.

While certain resources like Pell grants and federal student loans have caps on the amounts an individual can receive, you won’t miss out on these opportunities simply by not applying immediately when the application opens. For example, the size of your Pell grant will depend upon factors such as family size and income. But, whether you apply in January or March, the amount you receive will be the same. Similarly, while there are borrowing limits for student loans, there’s no finite pool of funds that gets depleted by early applicants.

Therefore, FAFSA funds do not “run out.” However, it is crucial to be aware of your state’s final deadline for FAFSA submission to ensure you don’t miss out on other potential aid. For the most accurate and up-to-date deadline information, refer to the Federal and State FAFSA deadline page.

Early Completion of FAFSA is Still Preferred

Applying early for FAFSA is still advisable in nearly every circumstance.

Beyond federal funding, most colleges offer need-based financial aid. This kind of aid is usually limited. At most institutions, submitting the FAFSA is part of the application process. Many schools require forms in addition to the FAFSA, but completing the FAFSA early is a proactive step you can take towards securing extra financial aid. Even if you don’t think you have any chance of qualifying, keep in mind that 20 minutes of paperwork could be worth hundreds or even thousands of dollars. This is one situation in which you don’t want to make any assumptions about your ability to qualify.

This advice extends to work-study opportunities as well. While completing the FAFSA can make you eligible for work-study, it doesn’t automatically place you in a job. Early qualification increases your chances of securing a position that matches your interests and needs.

Everyone Should Complete the FAFSA Promptly

Even if you don’t anticipate qualifying for any need-based aid, submitting your FAFSA application early is still highly recommended.

If you are planning to take out federal loans, it’s important to ensure those funds are in place before the semester begins. The efficiency with which colleges process this information can vary, and given the possibility of systemic errors, it’s wise to allow extra time for processing. The campus bookstore will not take an IOU while you wait for your FAFSA funds to hit your account.

Ideally, you want to avoid being in a position where you’re compelled to take on an emergency private student loan due to delays in the processing of your federal student loans. Starting the FAFSA process early can help prevent such scenarios

Final Thought: Don’t Procrastinate

The government won’t deny you student loans or grants simply because you weren’t among the first 500 people to submit the FAFSA. However, with each day that passes, potential opportunities are lost. Therefore, to maximize your chances of accessing financial aid, it’s best to submit your FAFSA as early as you can.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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