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As a student, you must submit a new Free Application for Federal Student Aid (FAFSA®) each school year to determine federal financial aid you qualify for, including grants, work-study programs, and student loans. Many colleges and states also use FAFSA information to award their own institutional and state-based aid, so skipping the FAFSA could mean missing out on thousands of dollars in free or low-cost funding.

The FAFSA for the 2026-2027 academic year opened on September 24, 2025, earlier than the traditional October 1 launch date. While the federal deadline to submit the FAFSA is June 30, 2026, it’s wise to complete the form as early as possible. Many states and schools award aid on a first-come, first basis and have much earlier deadlines.

What follows is a detailed guide to completing the 2026-2027 FAFSA.

Documents You’ll Need

Before you sit down to complete the online FAFSA application, gather the following documents and information to make the process smoother:

•   Your Social Security number

•   Your Alien Registration Number (A-Number), if you’re not a U.S. citizen

•   Your federal income tax return

•   Records of child support received

•   Current balances of cash, savings, and checking accounts

•   Bank statements and records of investments (if applicable)

•   Records of net worth of investments, businesses, and farms

•   Records of untaxed income (if applicable)

If you’re a dependent student, your parent(s) will need most of the same information to complete their portion of the FAFSA.

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How to Fill Out the FAFSA in 6 Steps

Ready to file the FAFSA? Most applicants complete the form in less than one hour, including the time needed to gather personal and financial information.

Here’s how to fill out the FAFSA step by step.

Step 1: Create an Account

Before completing the FAFSA online, you need to create a StudentAid.gov account. This account provides you with a username and password that allow you to securely log in, complete the FAFSA electronically, and sign the form digitally.

Any required contributor(s) must also create their own StudentAid.gov account. A contributor is anyone required to provide consent and financial info for your FAFSA, such as a parent, stepparent, or spouse. Contributors are not required to pay for your college education, but their financial information may be necessary.

Step 2: Provide Personal Information

After logging in, select “student” to indicate that you are completing the form as the student applicant.

You’ll begin by reviewing and confirming basic personal information, including:

•   Name

•   Date of birth

•   Social Security number

•   Email address

•   Mobile phone number

•   Mailing address

Next, you’ll answer questions about your personal circumstances, such as whether you are a veteran, have dependents of your own, or are a legally emancipated minor. These questions determine whether you’re classified as a dependent or independent student for financial aid purposes.

You’ll also be asked about:

•   Race and ethnicity (used for research purposes only and not factored into your aid eligibility)

•   State of residence

•   Parent education status

•   High school information

•   Any federal benefits you or your family members have received

Step 3: Add Student Financial Information

To be eligible for federal student aid, you must provide consent for the FAFSA to import your tax information directly from the Internal Revenue Service (IRS) through the IRS Direct Data Exchange. The 2026–2027 FAFSA uses 2024 federal tax information. Once you give consent, your relevant tax information will automatically populate the form.

You’ll also need to report:

•   Your tax filing status (e.g., single or married filing jointly)

•   Any child support you received

•   Your financial assets, such as cash in bank accounts and investments you own

Do not include your parents’ financial assets in this section. Those will be reported separately by your parent(s). If you are married, your spouse’s financial information may also be required.

Step 4: Select Colleges

Next, choose the colleges, universities, and career schools you’re considering. You can list up to 20 schools where you want your FAFSA information sent. Schools can be searched by name, city, and state or school code.

Recommended: How Many Colleges Should I Apply To?

Step 5: Review and Sign

You’ll then review the terms and conditions of the FAFSA, confirm that all the information you provided is accurate to the best of your knowledge, and electronically sign the application. Once signed, your portion of the FAFSA is complete. However, the entire form isn’t officially submitted until all required contributors (like parents or spouses) also complete and sign the form.

Step 6: Parents Add Information

If you’re a dependent student, you must invite your parent(s) to complete their portion of the FAFSA. You’ll do this by providing their email address, which sends them an invitation to access the form.

If your parents are married and filed a joint tax return, only one parent needs to fill out the FAFSA. If they’re married but filed separately, both parents are contributors. If your parents are divorced or separated and live apart, the parent who provided the most financial support during the past 12 months is the required contributor.

Parents will need to provide contact information, household size details, the number of family members attending college, and any federal benefits received. They’ll also consent to import tax data from the IRS and report financial assets, including:

•   Total balances of checking and savings accounts

•   Total value of investments, minus debts.

•   Current value of businesses or farms, minus debts

Retirement accounts — such as 401ks, IRAs, and pensions — should not be included on the FAFSA. After reviewing their information, parents will sign and submit the form.

Recommended: Quick FAFSA Tips and Mistakes to Avoid

If You Need Additional Help Filling Out the FAFSA

If you need assistance, click the white question mark icon next to any FAFSA question to view guidance. You can also visit the FAFSA Help Center, watch the FAFSA tutorial video, or chat with Aidan, the virtual assistant within the application.

Additional help is available through the Federal Student Aid Information Center, our FAFSA guide, or the financial aid office at the college or career school you plan to attend.

What Happens After You Submit the FAFSA?

Within one to three days of submitting your FAFSA, you’ll receive a FAFSA Submission Summary. This document summarizes your responses and includes your Student Aid Index (SAI), which schools use to calculate your financial aid eligibility.

Each college you listed on your FAFSA and are accepted to will send you a financial aid award letter. This may include federal aid such as:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Work-Study

•   Pell Grants

•   TEACH Grants

•   Federal Supplemental Educational Opportunity Grants (FSEOG)

Who Should Complete the FAFSA?

Almost every student planning to attend college or graduate school should complete the FAFSA. This includes students from middle- and high-income households, part-time students, and those who believe they won’t qualify for federal aid.

Many scholarships, grants, and institutional aid programs require a complete FAFSA regardless of income level. Even if you don’t qualify for need-based grants, you may still be eligible for federal student loans, work-study opportunities, or school-specific financial assistance. Completing the FAFSA ensures you don’t miss out on any funding options available to you.

What If I Don’t Qualify for Any or Enough Aid?

If your financial aid offer doesn’t fully cover your education costs, you still have several options. You can appeal your financial aid award if your family’s financial situation has changed due to circumstances such as job loss, medical expenses, or other unexpected hardship.

You can also apply for private scholarships and grants, which are offered by organizations, employers, and nonprofits and don’t need to be repaid. In addition, working part-time during the school year or over the summer can help offset education and living expenses.

Private student loans are another option for covering remaining costs. However, they should be used carefully since they often have higher interest rates and offer fewer repayment protections than federal student loans.

The Takeaway

Completing the FAFSA application doesn’t have to be overwhelming. In most cases, the application takes less than an hour from start to finish. By following this step-by-step guide, you can confidently submit your FAFSA and understand what types of financial aid you may be eligible to receive for the upcoming school year.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What’s the due date for the FAFSA?

The FAFSA opens on October 1st each year for the following academic year. For the 2026–2027 academic year, the FAFSA opened early (in September 2025). The federal deadline is June 30, 2027. However, be aware that many states and individual colleges have much earlier deadlines, so it’s always best to complete the FAFSA as soon as possible.

Can I fill out the FAFSA myself?

Yes, you can fill out the FAFSA yourself by visiting the official StudentAid.gov website. The online application is designed for the student to begin the process, and this is generally the fastest and most accurate way to submit the form. Whether you can complete the FAFSA form using only your information depends on your dependency status. If you are considered to be a dependent student for financial aid purposes, you’ll need to invite your parent(s) or other required contributor(s) to complete their own section of the FAFSA, providing their financial information and consent.

How long does it take to fill out the FAFSA?

The FAFSA form typically takes most applicants less than one hour to complete from start to finish, including the time spent gathering necessary documents. Gathering information like tax returns, Social Security numbers, and asset information beforehand can reduce the time to 30 minutes.

What disqualifies you from getting FAFSA?

Certain factors can disqualify an applicant from receiving federal student aid through the FAFSA. These include:

•   Not being a U.S. citizen or eligible noncitizen

•   Not having a high school diploma or equivalent

•   Not providing consent and to have your federal tax information transferred directly into form

•   Having defaulted on a federal student loan.

Additionally, maintaining satisfactory academic progress (SAP) is usually a requirement for continued aid eligibility.

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SOISL-Q425-053

Cash settlement in options is a method where the buyer of an option contract receives a cash payment equal to the difference between the option’s strike price and the market price of the underlying asset, rather than the physical delivery of the underlying asset. This means that instead of receiving the stock or commodity, for example, the option holder will receive an equivalent amount of cash that’s determined when the option is exercised.

Cash settlement may be used in options trading because it allows traders to speculate on the price movement of securities without having to actually own or hold the underlying assets. This can be particularly useful for traders looking to hedge their positions or who want to avoid the potential market risks associated with holding the underlying assets.

What Is Cash Settlement?

Cash settlement refers to a settlement method where the buyer of an option contract receives the cash difference between the strike price and the current market price of the underlying security. This is in contrast to the more traditional method of physical settlement, where the buyer of the option contract receives the underlying security upon exercise. Physical delivery and cash settlement are the two primary methods for settling a contract in options trading.

With physical delivery, the buyer of the option may receive, as an example, the shares of an equity or physical commodity when the option is exercised. Most listed equity options contracts are settled with the actual delivery of shares.

On the other hand, cash settlement allows the buyer of an option to receive the value of the underlying asset (per the contract terms) in the form of cash when the option is exercised rather than a stock or commodity. Equity index and binary options are often cash-settled.

Recommended: Options Trading 101: An Introduction to Stock Options

How Does Cash Settlement Work?

The purchaser of an options contract has the right, but not the obligation, to exercise their option, allowing them to buy (as with a call) or sell (as with a put) the underlying security at the agreed-upon price (called the strike price).

In a cash settlement, as noted above, the buyer of the option does not purchase or sell the underlying security. Instead, they receive a cash payout based on the difference between the strike price and the current market price of the underlying security.

Example of Cash Settlement

Suppose an investor buys a call option on a stock with a strike price of $50. This means the investor has the right to buy the stock at $50 per share at any time before the option expires, if the stock’s price is above the strike price. If the stock’s market price rises above $50, the option becomes “in the money,” and the investor can exercise their right to buy the stock at $50, even if the market price is higher.

Suppose that, when the option expires, the stock’s market price is $55 per share. If the option is cash-settled, the investor can exercise their right to buy the stock at $50 per share and thus receive a cash payment of $5 per share, which is the difference between the strike price and the market price, multiplied by the number of shares in the contract (typically 100). This means the investor would receive a total cash payment of $500 (assuming they exercised a standard options contract of 100 shares).

Alternatively, if the stock’s market price is below $50 when the option expires, the option becomes “out of the money,” and the investor will not exercise their right to buy the stock. In this case, the option would expire worthless, and the investor would not receive any cash payment.

Recommended: In the Money vs Out of the Money Options

Pros and Cons of Cash Settlement

There are certain advantages and disadvantages to settling options contracts with cash that are worth considering when trading options.

Advantages of Cash Settlement

There are several advantages to using cash settlement in options trading. First, it can be more convenient for the buyer, as they do not have to worry about physically receiving and storing the underlying asset. Cash settlement can be beneficial for traders who cannot hold the underlying asset, such as those who are trading options on futures contracts of commodities.

Another advantage of cash settlement is that it can be more cost-effective. Since the buyer does not have to take possession of the underlying asset, they do not have to pay any additional fees or expenses associated with holding an asset like gold, oil, wheat, or other commodities. This can help to reduce the overall cost of trading options and make them more accessible to a broader range of investors.

In addition to these advantages, cash settlement can provide greater flexibility for options traders. With physical delivery, the buyer must take possession of the underlying asset when the option is exercised, which could limit their ability to trade the asset in the future. With cash settlement, the buyer could use the funds received from the option to buy or sell the underlying asset in the market, allowing them to potentially take advantage of changing market conditions.

Furthermore, cash settlement allows for a more efficient transaction in the overall derivatives markets — which includes options — adding to its liquidity.

Drawbacks of Cash Settlement

There are some drawbacks to cash settlement compared to physical settlement. For example, some investors may prefer the security and control that comes with physically owning and holding an underlying asset, rather than receiving a cash payment. This is because cash can be more easily lost, stolen, or subject to inflation, whereas physical assets may provide a more tangible form of wealth.

Also, cash settlement may not be available for all asset classes. While it is commonly used for index options and certain derivatives, many equity options and commodity contracts still require physical settlement. This can limit the flexibility of traders or investors who prefer the convenience of cash settlement.

Other cash settlement drawbacks include the fact that it is usually only available to European-style options, where the option holder can only exercise the contract at expiration rather than early like American-style options. Also, physical settlement may be preferred by traders who need the underlying asset for use.

Cash Settlement vs Physical Settlement

There are several important differences between cash settlement and physical settlement.

Definitional Differences

Cash settlement of options is a financial settlement where a cash payment covers the difference between an option’s strike price and the market price of the underlying asset. Physical settlement involves the actual transfer of the underlying asset. A common physical delivery example is a commodity, but it can also take the form of shares of an underlying financial asset, such as stock.

Mode of Payment

Option cash settlement payments are typically processed quickly through the clearing house. They are straightforward financial account transfers of the difference between the underlying asset’s spot price and the strike price of the options contract.

Physical settlement consists of delivery of the option’s underlying asset, which could be delivery of shares or physical delivery of a commodity that may require storage, such as an agricultural product.

Level of Liquidity

Liquidity is better in markets with a cash settlement option versus those with physical settlement only. More market traders — hedgers and speculators — can participate in cash-settled derivative markets since there can be lower capital requirements. Options traders can also engage in rolling options instead of exercising them.

Time Taken

Option cash settlement transactions are generally processed rapidly via electronic clearing systems, whereas physical delivery involves the potentially lengthy delivery time of the underlying commodity.

Level of Risk

Another potential benefit of cash settlement is that the operational and logistical risks are typically lower. Physical settlement often involves transfer certificates and other documents that could be susceptible to manipulation, loss, and theft.

Convenience

It is hard to argue with the convenience of cash settlement. Two parties square up using straightforward price differences rather than figuring out the logistics of the physical delivery of an asset. In some cases, such as with most equity index options, the contracts must be cash-settled. Cash settlement may also involve fewer fees since there’s no need to complete additional trades to manage delivery. However, paying any potential additional fees and holding or storing the underlying asset may well be worth the cost and effort, depending on an investor’s objectives.

Practicality

Due to the potentially lower costs involved and the ease of receiving a quick cash payment, option cash settlement may be more practical than physical settlement. However, the practicality of an investment really depends on what an investor is hoping to achieve and how well it aligns with both their short- and long-term goals.

Costs Involved

Trades with cash settlements can have low or even zero cost until settlement when the buyer and seller reconcile with a payment. With physical delivery, there may be several costs, such as transportation costs, delivery expenses, and broker fees.

Simplicity

One advantage of cash settlement is its simplicity, as it involves a single net payment rather than the logistical steps of transferring assets. However, physical settlement may be preferred by investors who want direct ownership of the underlying asset. Each method has its own benefits and drawbacks, depending on the investor’s goals.

Popularity

The Takeaway

Cash settlement in options trading may provide a convenient and cost-effective way for buyers of options contracts to exercise their rights in relation to the underlying asset. By receiving the asset’s value in cash, traders can avoid the costs and complications associated with physical delivery while still maintaining the flexibility to use the funds they receive to trade the underlying asset in the market.

However, investors should be aware that most equity options are not cash-settled but are settled with the delivery of underlying shares of stock.

SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.

With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.

FAQ

What is the difference between a physical and cash settlement?

Cash settlement is a financial payment for the value of a stock or commodity underlying an options or futures contract when the holder exercises. Physical settlement entails the actual delivery of the underlying asset. In commodities markets, that means the commodity is delivered to the buyer. With equity options, physical delivery happens when the buyer receives shares of the underlying asset specified in the options contract.

Can you trade with unsettled cash?

Yes. You can use the proceeds from a sale to make another purchase in a cash account while your funds remain unsettled. Unsettled cash from a day trade cannot be used for another purchase until the settlement date.

Which futures are cash settled?

According to the CME Group, equity indexes and interest rate futures are the most common cash-settled markets. Some precious metals and foreign exchange markets also settle in cash, along with agricultural products. In the options market, cash-settled options include digital options, binary options, and plain-vanilla index options. Note: Binary options are considered high-risk and may not be available on all trading platforms.

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