Does FAFSA Run Out of Money? Why You Should Apply Early

Many questions arise regarding the availability of financial aid for higher education. A common concern revolves around whether the Free Application for Federal Student Aid (FAFSA) can “run out of money.” The answer is not a simple yes or no, as funding structures for different types of aid vary significantly. Understanding these distinctions is important for anyone seeking assistance to cover educational expenses.

Federal Student Aid Funding Mechanisms

Federal student aid is primarily categorized into two distinct funding models: entitlement programs and campus-based programs. Entitlement programs, such as Federal Pell Grants and federal student loans like Direct Subsidized, Unsubsidized, and PLUS Loans, are generally available to all eligible students as long as Congress appropriates the necessary funds. If a student meets the eligibility criteria, they are generally guaranteed to receive this aid. Federal Pell Grants, for instance, are awarded to undergraduate students who demonstrate exceptional financial need and have not yet earned a bachelor’s degree.

In contrast, campus-based programs operate on a limited funding model. These include the Federal Supplemental Educational Opportunity Grant (FSEOG) and Federal Work-Study programs. Funds for these programs are allocated by the U.S. Department of Education to individual colleges and universities, which then distribute them to eligible students. Because each school receives a finite amount of these funds annually, they are often awarded on a first-come, first-served basis or prioritized for students with the greatest financial need. Once a school’s allocation for these specific programs is exhausted, no further awards can be made for that academic year.

Impact of Application Timing and Deadlines

The timing of your FAFSA submission plays a significant role in the amount and types of financial aid you may receive, especially for limited funds. While the federal deadline for submitting the FAFSA is typically June 30 of the academic year for which you are seeking aid, waiting until this date can reduce your aid opportunities. For example, the federal deadline for the 2025-2026 academic year is June 30, 2026.

Beyond the federal deadline, applicants must also consider state and institutional deadlines, which are often much earlier. Many states have their own financial aid programs with specific application deadlines, and these state funds are typically limited and awarded until they are depleted. Colleges and universities also establish their own priority deadlines for distributing institutional aid and the limited federal campus-based funds they receive. Missing these earlier state or institutional deadlines can significantly diminish a student’s aid package, as funds for these programs are often disbursed on a first-come, first-served basis.

Maximizing Your Financial Aid Potential

To maximize financial aid potential, understanding your Student Aid Index (SAI) is a helpful first step. The SAI is an eligibility index number calculated from information provided on your FAFSA, which financial aid offices use to determine your federal student aid eligibility and financial need. This number is not the amount of aid you will receive or what your family is expected to pay. A lower SAI generally indicates a higher financial need and can increase your likelihood of qualifying for need-based aid.

Completing the FAFSA accurately and as early as possible each year is important to ensure you meet all federal, state, and institutional deadlines, increasing your access to limited aid programs. Beyond federal aid, explore other types of financial assistance, such as private scholarships and institutional grants. Upon receiving your financial aid award letter, carefully review the breakdown of grants, scholarships, and loans to understand your complete aid package. If your financial circumstances change unexpectedly, you may be able to appeal your aid decision by contacting the financial aid office with supporting documentation. Maintaining satisfactory academic progress by meeting your school’s grade point average and course completion requirements is necessary to remain eligible for federal financial aid in subsequent years.