If you have a teenager interested in attending college, filling out the Free Application for Federal Student Aid (FAFSA) is the first step in finding money to pay for college. FAFSA is the gateway application for federal financial aid along with scholarships, school aid, Work Study programs, and even state aid.
Some states offer financial aid on a first come, first serve basis. Several other states and many colleges give priority assistance to students who file their applications early. Just how early? On a recent college campus trip we discovered most colleges recommending submitting the FAFSA before January 31. Since most of us don’t even have our W-2s yet, we have to estimate our income instead. Here are three ways this can be done.
Refer to your paycheck and brokerage statements
The best way to estimate income for the current year is by using the year-to-date earnings listed on the last paycheck and the last brokerage statement of the previous year. If your family also has other sources of income like ours does, be sure to review last year’s tax returns to make sure that you aren’t overlooking anything like business or rental income.
Refer to last year’s tax return
Small business owners like me have the advantage of not needing to wait for someone to mail us a W-2. If last year’s business income is nearly identical to the previous year’s, you can use the numbers from the previous year’s tax return. If the income is higher or lower, do the math to figure out what your business income was by tallying the gross income and then deducting the business expenses.
Download a 1040
If your income has radically changed from the previous year, downloading a 1040 form from the IRS website is another great way to estimate income for FAFSA. You can estimate income based on that last pay stub of the year and then include any deductions that you might qualify for. The adjusted gross income on line 37 is the figure to use as an estimate on your FAFSA.
Students who meet the January 31 early deadline for FAFSA often receive more generous financial aid packages than those who wait until June 30. This is the reason for hitting that early deadline even if it’s just an estimate. Once the current year’s tax forms have been submitted, you have until September 19 to change the estimate to the actual numbers.
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Additional resources: Fast Web: How do I file the FAFSA in January when tax returns can’t be filed that early?