What is FAFSA? Understanding federal student aid

It’s no secret that college is expensive. But figuring out how to pay for higher ed can feel like a challenge. If you’re a student or a family member of one, you’re likely to seek financial support for college expenses through financial aid. Free Application for Federal Student Aid, or FAFSA, helps you obtain this financial assistance. The application involves detailed tax and other financial information, so it can get complex.  

It’s important to understand how to apply, what information is required, and the types of aid available, so let’s get into the details. We’ll help you understand the FAFSA tax form information and more.

What is FAFSA? What does FAFSA stand for?

The FAFSA, or Free Application for Federal Student Aid, is the official form students and/or students’ families use to apply for financial aid to help pay for college. The federal government, states, and colleges use it to determine needs and who may receive aid such as loans, scholarship, and grants.

Even if you don’t qualify for financial aid, submitting a FAFSA might help you obtain state or college-based financial aid.

FAFSA 2025: When is FAFSA due this year?

The FAFSA deadline is June 30, 2026, for the 2025-2026 school year. However, many states and individual colleges have their own earlier deadlines for financial aid applications. 

You can apply for FAFSA starting on or after October 1st of the year before the academic year you’re requesting aid for, though the specific opening date can vary slightly.

When should you apply for federal student aid?

Apply for financial aid via FAFSA as soon as you can. Why?

• It boosts your chances of getting financial aid. Schools and public sources often distribute financial aid on a first-come, first-served basis. Applying early gives you a better chance of getting these limited funds. Students who file the FAFSA early tend to receive more aid than those who file later.
• It helps you meet “priority deadlines” for specific institutional and state aid. While the FAFSA deadline is generally June 30 each academic year, some colleges have different deadlines for financial aid programs. These are often referred to as “priority deadlines,” and meeting them can help increase your chances of receiving institutional and state aid as well.

What if I don’t know what schools I’m applying to? Don’t worry; you can always update a FAFSA. Even if you haven’t finalized your college choices, you can list the schools you’re considering on the form and update it later. So, don’t wait until college acceptance letters arrive, as this may be too late to meet earlier deadlines. 

Types of aid the FAFSA offers

Federal student aid covers a lot of types of assistance, and the FAFSA determines if you’re eligible for it. Here are the types of aid available:

• Federal student loans: The FAFSA helps you apply for several types of loans. Subsidized loans take financial need into account and don’t accrue interest. Unsubsidized loans, on the other hand, don’t factor in financial need and collect interest over time.
• Work-study programs: This program offers part-time jobs on or near the college campus to help cover college expenses.
• Federal grants: The federal Pell Grant is the most extensive grant program funded by the Department of Education (DOE). The DOE awards undergraduate students with this grant based on financial need, and recipients don’t repay them. Generally, if your SAI is between -1500 and 0, you can qualify for the maximum grant amount.
• Private grants and scholarships: States or specific higher education institutions give grants based on financial need, ability, or merit.

Note: Depending on your financial need, you could receive a combination of financial aid.

How is financial aid determined?

The Department of Education (DOE) calculates financial need with a formula called the Student Aid Index (SAI). It reflects your and your family’s financial situation and can range from -1,500 to 999,999. In some cases, your SAI can be a negative number. The lower the number, the greater your financial need.

The DOE determines your SAI based on:

• Income reported on a federal tax return
• Untaxed income
• Investment and other financial assets
• Financial assets
• Family size
• Number of family members in college and in a household
• Living expenses  

Each college uses your SAI to find out how much aid you qualify for. This number is based on their Cost of Attendance (COA).

To figure out your unique financial need, the college subtracts the cost of attendance from the student aid index.Here’s the formula:

Cost of Attendance – Student Aid Index (SAI) = Financial Need

How to fill out the FAFSA

How does FAFSA work? Here’s the process of completing a FAFSA:

1. Gather personal info: Have the following information on hand:
   + Your Social Security number or alien registration number
   + Your parents’ info (if you’re their dependent)
   + Federal tax returns from the past two years, along with Schedules 1 through 3
   + Bank or checking account balances
   + Records of untaxed money earned or received
2. Create an account: Navigate to the FAFSA® Application and create a free account. You need an account to fill out a FAFSA if you’re a qualifying tax dependent. For a dependent student, both parents and the student are required to complete and submit the FAFSA. Parents must create their own FSA ID to log in, add their financial information, and electronically sign the form to complete their portion. This information is used to determine the student’s eligibility.
3. Complete the FAFSA online: Create or log in to the account, and then click “Log in to Start.” If starting from scratch, select “Create an Account” to start a new login and create a Federal Student Aid ID.
   Note: Start and stop the application process online at any time after you complete this step. Click “Continue” after you’ve completed all required sections.
4. Answer questions: Follow the prompts and answer the questions listed on the FAFSA.
5. Add your schools: List the colleges you or your dependent applied for.
6. Provide tax and financial info: Use the IRS Data Retrieval Tool to import your tax info. Or you can upload each required tax document one by one to complete the FAFSA tax form section.
7. Sign and submit the FAFSA: You and your parent (if you are a tax dependent) must sign the form using your FSA IDs. Then, click “Submit.”
8. Wait for your FAFSA to be processed: After you submit the FAFSA, your application will enter a federal processing system to cross-check your information against other agencies (like the Internal Revenue Service (IRS) and Social Security Administration (SSA). The DOE calculates your SAI upon receiving your application.
9. Check your email and review the submission: The Department of Education will send an email confirming your FAFSA has been processed, along with your official Student Aid Report (SAR) or a FAFSA Submission Summary. Review it for errors. The DOE also sends it to the list of colleges you entered on the FAFSA.
10. Take note of your SAI: Jot down your SAI, as this amount shows what financial aid you’re eligible for. The colleges listed on the FAFSA application will reach out to you with financial aid offers. Review the information, then accept the offer from your chosen college.
11. Work with the college: Collaborate with your school’s financial aid office to explore options for covering the remaining college costs.

FAFSA tax information: What’s required on your FAFSA application?

FAFSA uses your taxes to figure out your or your family’s financial ability to contribute to college costs. If you’re a dependent student, you’ll use your parents’ tax return. If you file independently, use your own tax return.

What tax return for FAFSA 2025-26?

Use your 2024 tax return for the 2025-26 school year. Then, use your 2025 tax return for the 2026-27 school year.

What tax information is relevant for completing your FAFSA?

This tax information can help accurately process your FAFSA:

• Earned income: This amount shows how much you or your parents earn in a tax year. It includes financial investments or assets, such as bonds, stocks, or income from business and farming activities.
• Tax filing status: This determines your tax filing status and the income and assets you need to report.
• Adjusted Gross Income (AGI): This amount shows your total income minus certain tax deductions. Line 11 of IRS Form 1040 shows this amount.
• Non-taxable income: Non-taxed income includes child support, welfare, workers’ compensation, Social Security, interest on government-issued municipal bonds, certain veterans’ benefits, and inheritances. While it’s not taxed, it contributes to you or your parents’ financial standing, so it’s important to note.
• Federal tax: This shows your total federal tax in a tax year (on Line 24 on Form 1040)
• Supporting 1040 schedules: Supporting 1040 schedules capture other income sources and deductions not listed on the main Form 1040. For instance, Schedules 1, 2, and 3 help gain a clearer understanding of your or your family’s overall financial picture beyond standard wages, deductions, and credits.
  • Schedule 1 displays additional income and adjustments, including other sources of income such as unemployment, farm income, capital gains, and tax adjustments.
    • Schedule 1-A (Form 1040) is used for additional deductions, such as for tips or overtime pay, car loan interest, and an enhanced deduction for senior citizens. 2025 Schedule 1-A (Form 1040).
  • Schedule 2 shows additional taxes, like self-employment tax or taxes on IRA distributions.
  • Schedule 3 shows tax credits, like tax credits for higher education.

• If you didn’t file federal tax return: If you or your parents didn’t file a federal return, you’ll need to show other tax documents, like the W-2 form, pay stubs, or a verification of non-filing from the IRS.

FAFSA and taxes FAQs

How does my tax info relate to the FAFSA?

Your tax information helps determine how much financial aid you’re eligible for by showing your income and assets. The Department of Education (DOE) uses this data to calculate your Expected Family Contribution (EFC), which is used to figure out how much aid should be awarded to you.

With the updated FAFSA process, most of your tax data transfers directly from the IRS database. Still, you should keep your tax return handy for other FAFSA inputs.

Does financial aid count as income?

Most financial aid is not taxable income. However, if you use any scholarship or grant money for non-educational costs like living expenses, that amount is taxable. Report the taxable portion on your tax return.

Do I have to pay taxes on student loans?

Loans are not taxable, so you don’t report the loan on your tax return. However, when you repay a student loan, you can qualify for the student loan interest deduction for college expenses.

Related: Is Financial Aid Taxable?

Is money from a Pell Grant considered taxable income?

Pell grants are not taxable if you use the funds for qualified education expenses like tuition, books, school fees, and supplies required for your classes. If you use grant funds for non-qualified expenses such as housing, food, or travel, it’s considered taxable income.

What about work-study awards? Is that considered taxable income?

If you have a work-study job while enrolled in college, the income you earn is taxable. As such, report it on your federal tax return on the line showing your wages.

Can you fill out the FAFSA without a tax return?

You can fill out a FAFSA without a tax return in certain situations recognized by the government.

1. You can’t find your tax return. You can access your return by connecting with your tax pro, downloading it from tax software, or using the IRS’ Get Transcript tool. Related: Find past year returns.
2. You or your parents haven’t filed. If you or your parents finish the FAFSA application prior to filing taxes, select “Will file” and use your last pay stub and tax return from the previous year. Make sure to update your FAFSA from “Will file” to “Already completed” and enter your exact amounts.
3. You don’t file a return. If you fall below a certain income, you or your parents may not need to file federal taxes. If this is the case, select “Will not file” when you complete the FAFSA and provide supplemental Form W-2s, 1099s, or pay stubs as proof of income. (Related: How much do you have to make to file taxes?)
4. You aren’t a U.S. citizen. If you or your parents aren’t U.S. citizens, select “Foreign Country” when answering your state of legal residence. You can also choose “Foreign Tax Return” in the form that asks what type of tax return you filed.

Get help with FAFSA tax information and filing your taxes from H&R Block

If you need tax assistance as a college student or parent of one, H&R Block is here to help. We can help you file your taxes, so you have the details for your FAFSA tax forms.

Whether you choose to file with a tax pro or file with H&R Block Online, you can rest assured that we’ll get you the biggest refund possible.