Is FAFSA Money Free?
Free sounds simple. Paying for college doesn't. The Free Application for Federal Student Aid (FAFSA) unlocks three very different sources of funding: gift aid, paychecks, and loans. Some of that money is truly free. Some you earn. Some you pay back.
Your FAFSA can bring in Pell Grants that drop your tuition bill, campus-based grants that run out if you wait, work-study that pays wages you can spend on books or bus rides, and federal student loans with repayment needed after college. Pell reduces net price. Work-study pays as you work. Loans are debt, even with friendlier terms.
We know that probably made things even more murky, so here's a detailed explanation of the free and repaid money coming from the FAFSA process. We also share the 2026–2027 FAFSA updates you need to know about.
What the FAFSA actually is
The FAFSA is the form, not the funds. You file it, and then the U.S. Department of Education, your state, and your colleges use it to pull together a financial aid offer. Filing early matters because some financial aid is available on a first-come, first-served basis.
The federal FAFSA deadline for 2026–27 is June 30, 2027. Corrections to the form are allowed through Sept. 12, 2027. However, please note that state deadlines are earlier and vary.
Is money from the FAFSA free?
The short version: some is and some isn't. Here's the split.
Aid type | Repayment | What to know now | Why it matters |
Pell Grant | No | For 2026–27, you’re ineligible for Pell if your Student Aid Index, SAI, is at least twice the maximum Pell amount. Foreign earned income that was excluded on the tax return is added back for Pell decisions. | Clear line between who gets “free money” and who doesn’t, fewer edge cases. |
Federal Supplemental Educational Opportunity Grant, FSEOG | No | Campus-based and limited. Many schools prioritize Pell-eligible students with exceptional need. | The early-filer advantage is real, funds can be gone. |
TEACH Grant | Not if you complete service | If service rules aren’t met, it converts to a Direct Unsubsidized Loan with interest back-dated to the original disbursement. | “Free with strings” is still debt if you miss the terms. |
Federal Work-Study | You earn it | Part-time job, usually paid by paycheck. Great for books and transit, not a full bill-payer. | Helps cover living costs without borrowing. |
Direct Loans | Yes | Better protections than most private loans, still debt. Borrow after grants, scholarships, and work-study. | Keeps college possible, but affects future budgets. |
What "free" money actually covers
Financial aid isn't just for tuition. Colleges build a cost of attendance that includes housing and food, books and supplies, transportation, and personal expenses. If your grants and scholarships exceed what you owe the school, the leftover is a credit balance that you can use. Schools must release that money to you within 14 days so that you can cover real-life costs like groceries, a laptop, or a bus pass.
Big FAFSA changes for the 2026–2027 year
These aren't splashy updates, but they do change financial aid outcomes.
- Family businesses and farms: Beginning with the 2026–2027 year, the SAI asset calculation excludes the net worth of a family-owned business with 100 or fewer full-time or FTE employees, the family farm you live on, and a family-owned commercial fishing business. Don't report them as assets on the FAFSA.
- Pell Grant guardrails: The Department of Education's updated SAI and Pell Grant guidance confirms the "twice the max Pell" cutoff and reinstates the foreign earned income exclusion to AGI for Pell decisions. Translation: some high-income edge cases will lose Pell Grant access, and foreign income doesn't disappear.
- Adding contributors is easier: You can invite a parent or spouse to complete their section with just an email. They'll get a link and a unique invitation code to enter. So it's faster, and with fewer typos.
- Your college list: You can put up to 20 colleges on your FAFSA. If your list grows, you can always swap schools later.
FAFSA vs CSS Profile, where "free" differs
Many private colleges also require you to complete the CSS Profile. It digs deeper than FAFSA and often considers home equity when deciding institutional grants. If a college requires the CSS Profile, look into how they treat home equity and small businesses. It's better to know ahead of time than to get a surprise.
FAFSA money FAQs
Is FAFSA money free?
Grants and most scholarships are free. Work-study is earned. Loans must be repaid. Pell is free money if you qualify under the updated rules.
What makes someone ineligible for Pell in 2026–2027?
If your SAI is at least twice the maximum Pell amount, you won't get Pell. The Education Department is also reinstating the foreign earned income exclusion for Pell Grant decisions.
Can my parent, who doesn't have a Social Security number, still complete their part?
Yes, there's a defined process for contributors without an SSN to create an account and complete their section online.
How many colleges can I send my FAFSA to?
Up to 20 at a time online. Add more later by swapping some out.
Do outside scholarships reduce my grants?
They can. Sometimes schools "repackage," which means they adjust your aid if something changes. This happens before any financial aid money is disbursed. For instance, when you win an outside scholarship, switch housing, or take fewer credits, they might repackage your financial aid award to give you less. Colleges are allowed to adjust your package so that it doesn't exceed your cost of attendance or your need under federal rules.
When will I see refund money for living costs?
If your total aid adds up to more than your tuition and fees, that extra amount becomes a credit balance on your account. This happens after your financial aid is disbursed. By federal rule, your school must release that money to you within 14 days. Some campuses call it a "refund" or "disbursement."
That refund is what most students use to cover off-campus rent, books, transit passes, groceries, or laptop repairs. The real-life costs that don't show up on your tuition bill. It's easy to spend it fast, so budget it like a paycheck.
Final thoughts on the FAFSA
The FAFSA is the doorway. The win is what walks through it for you, ideally, more grants than loans, with a paycheck to cover the in-between.
So file the FAFSA early. Then move on to the fun part: comparing aid offers and figuring out which school gives you the best deal for your dream. The best part? Appily can help with this. With a free account, you can:
- See your chances of acceptance so you can apply to the right mix of schools.
- Find scholarships that don't require FAFSA results.
- Compare colleges by real net price, graduation rates, and job outcomes.
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