The US Department of Education recalculates your financial aid eligibility each school year, which could lead to more or less aid being awarded in response to changes in your family’s financial situation. For example, if your family’s income decreases, your financial need may change, making you eligible for grants and subsidized federal student loans.
Another reason to file the FAFSA is to qualify for scholarships from your college. Many colleges require students to submit a FAFSA application as part of the scholarship application package. This requirement seeks to maximize the utility of the scholarship funds by giving them to the neediest applicant.
Finally, submitting a new FAFSA form ensures that you’re eligible to borrow new federal student loans. Federal student loans can help you pay for the cost of attendance that’s not covered by grants, scholarships, or work-study.
It’s best to exhaust federal student loans first if you’re an undergraduate student. Federal loans typically have lower fixed interest rates and better repayment terms than private student loans. You can also get them without a cosigner.