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Families are missing out on 'thousands of dollars' in free money for college

"There are literally billions of dollars getting away every year."

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A lot of college students were learning remotely last year during the pandemic, but that didn't stop the cost of college from going up: Tuition at private, four-year schools increased more than 2% between the 2020-21 school year and the year before, according to the College Board. That brings the total cost to attend to an average $50,770 for a four-year private school. An in-state, four-year public school runs $22,180.

And while paying for college can be a major stressor for many students and families, a lot of them may be leaving money on the table.

One big missed opportunity: Almost a third of families aren't filling out the Free Application for Federal Student Aid, or FAFSA, according to a recent survey by Sallie Mae. Only 68% of families with enrolled college students filled it out for the 2020-21 school year. That's down nearly 10 points from just two years ago.

It's a concerning trend since "FAFSA is the gateway to financial aid from the federal government," says college planning expert Mark Kantrowitz. "It takes typically half-an-hour to an hour to complete [the form]," he adds. "And it can give you thousands of dollars of money to pay for college."

Here's what you need to know about filing the FAFSA and how not to miss valuable opportunities to cover college bills.

'Everybody should fill out the FAFSA'

"Everybody should file the FAFSA," Kantrowitz says. "Even if you don't think you're going to qualify for financial aid, even if you don't think you need financial aid, you should file the FAFSA."

Without it, you could be missing out on several different kinds of college funding. Colleges use the FAFSA to make decisions about aid students don't need to repay, including need-based grants, and sometimes, merit aid. It's also required to borrow federal loans, which Kantrowitz says are "the cheapest fixed rate loans available to pay for college."

All told, in the Sallie Mae report, FAFSA-influenced funding sources covered 35% of the typical family's college tab.

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One possible reason fewer people filed the FAFSA is because so few college students were living on campuses last year, Kantrowitz and other experts say.

"It could be that families just didn't need to take those loans because so many students were doing classes remotely, so there's no room and board," says Amy Mahon, director of operations and marketing at Reich Asset Management in Marmora, New Jersey.

The FAFSA opens on Oct. 1, 2021, for the 2022-23 academic year. Families can still file the form for 2021-22, although some kinds of aid may already be tapped out.

Applying for scholarships can be a 'one a day' habit

Another big missed opportunity for families paying for college: Nearly half of them, 44%, didn't use scholarships. And of those families who didn't use scholarship money, more than three-quarters of them, 78%, never even applied for any in the first place. 

That's unfortunate, says Krisitina Ellis, creator of college planning resource collegeninja.com, who received $500,000 in scholarships for her undergraduate and master's degrees. "There are literally billions of dollars getting away every year," she says — money that could be used to reduce or eliminate the need to borrow to pay for college.

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Oftentimes, people who don't apply for scholarships point to the time commitment as a hurdle, she says. But you can break it down into manageable goals. When Ellis was in high school, she treated finding scholarships "like a part-time job."

"If you want to apply for a ton of scholarships, do one a day," she recommends. "Take 30 minutes to an hour to do one application a day, versus just getting so lost in the enormity of applying for a huge amount of scholarships all at one time."

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