Whether or not high school seniors already know where they’re headed to college this fall, it’s time for their parents to do their homework. The same goes for families whose children will be returning to campus.

Filing the Free Application for Federal Student Aid (Fafsa)—preferably, as soon as possible after January 1—is necessary to be considered for financial aid from federal and state government and from most colleges and universities. This includes grants, loans and, even, sometimes, merit-based aid. Many private schools also require students to file the College Board’s CSS/Financial Aid Profile application.

Although the federal deadline for filing the Fafsa for the 2015-16 academic year isn’t until June 30, 2016, many states and schools have deadlines in early 2015 and some award aid on a first-come, first-served basis, says noted financial aid expert Mark Kantrowitz, co-author of the book Filing the Fafsa and senior vice president and publisher of Edvisors.com, a website focused on planning and paying for college.

Even families who think they are too wealthy to qualify for free or subsidized aid or who were previously turned down should file the Fafsa, he says. According to the 2011-12 National Postsecondary Student Aid Study (Npsas), 11.3% of students whose parents earned $100,000 or more received need-based grants from their colleges and 18.9% received non-need and merit-based grants, he notes.

“It’s very difficult to predict how much aid a student might get from year to year,” says Kantrowitz. One factor that can strongly impact this is the number of siblings enrolled in college, because the Fafsa-calculated Expected Family Contribution (EFC) is divided by this figure. The other factor is the price tag of a particular school.

“If there are two kids in college,” he says, “that’s almost like having half as much income.”

For example, if a family has an EFC of $29,000, a student might qualify for some need-based financial aid at a private non-profit college that charges $50,000 to $60,000 per year but not at a public college charging half that, he says. With two kids in school, each child’s EFC might drop to $15,000, which, he says, could make them eligible for some need-based aid even at a public school.

Wealthier families are filing the Fafsa at a similar rate to the middle class. According to data Kantrowitz pulled for FA from the 2011-12 NPSAS, the filing rate among U.S. families with children seeking bachelor’s degrees is 72.0% for those with adjusted gross income of $200,000 to $249,000, 73.2% for $250,000 or more. This compares with 72.8% for families earning $50,000 to $99,999 and approximately 69.7% for those in the $100,000 to $199,999 brackets.

To be sure, the Fafsa, which requires over 100 data elements and takes an hour to complete, is intimidating to families, he says. “The sad thing is, I wrote a 250-page book to help people complete a six-page form,” he says. “That shows you how complicated it is.” The book is downloadable for free in PDF format at Edvisors.com. It is also available for purchase in paperback and Kindle formats at Amazon.com.

Form Fundamentals
Kantrowitz, who in 1996 provided the U.S. Department of Education with a prototype implementation of an online Fafsa, encourages families to file the form online because of faster processing, built-in edit checks and skip-logic functionality. This means respondents aren’t asked questions that don’t apply to them.

Parents don’t have to file a 2014 tax return before submitting the 2015-16 Fafsa. But if they estimate their income, they must update the Fafsa when they do file their tax return. Using the IRS Data Retrieval Tool to transfer data from federal income tax returns to the Fafsa may reduce the likelihood that a student’s Fafsa will be selected for verification of data that was reported, he says.

Two big changes to the Fafsa starting with the 2014-15 award year involve parent relationships. First, same-sex couples legally married in a state where same-sex marriage is recognized must file the Fafsa as a married couple. Previously, same-sex parents were treated as divorced. From a financial aid perspective, “It’s a little bit of a mixed bag,” says Kantrowitz, since they may have to pay more for school.

Second, any student’s parents who live together, even if they are divorced or were never married, are now treated as married and both must report income and assets on the Fafsa.

Watch out for grandparent-owned 529 college savings plans. Their distributions are reported as untaxed income to the beneficiary (the student) and can reduce need-based aid eligibility by as much as half the distribution amount, says Kantrowitz. In contrast, a 529 plan owned by a dependent student or parent is treated as a parent asset and is assessed, at most, by 5.64%, he says.

For example, a $10,000 distribution from a grandparent-owned plan could reduce aid eligibility by as much as $5,000, while $10,000 in a parent-owned plan could reduce eligibility by a maximum of $564, he notes. “It’s important in their desire to help that they don’t accidentally reduce or eliminate their grandchild’s ability for need-based aid,” he says.