As of Oct. 1, college-bound students can apply for their share of $150 billion in federal student aid, including grants, loans and work-study. To apply, they need to complete the Free Application for Federal Student Aid, or the FAFSA.

FAFSA funds are distributed on a first-come, first-served basis.

Sallie Mae recently polled 2,000 undergraduate students and parents and asked if they submitted the FAFSA. According to Sallie Mae's analysis, during the 2018-2019 school year, only 25% of undergraduate students completed the FAFSA the first month it was open, and just 77% of undergraduate students completed it at all.

By not filling out the FAFSA, American college students are missing out. Federal grants do not need to be repaid, federal student loans have low interest rates, and work-study programs can be a convenient way to simultaneously fund an education and build a resume.

Because FAFSA funds are distributed as applications come in, families who plan ahead can gain an upper hand. Sallie Mae reported that 80% of students from families that make between $35,000 and $100,000 filled out the FAFSA, but 75% of students from families making less did so.

NerdWallet estimates that students who are Pell Grant-eligible missed out on $2.6 billion in free FAFSA college aid in 2018 simply because they did not submit the FAFSA.

In Sallie Mae's poll, the company asked the students and parents about their reasons for not submitting the FAFSA.

Here's what they said:

Among the almost quarter of college students who did not apply, nearly 40% said their reason was they didn't think they would qualify. But there is no income cut-off to apply for federal student aid.

Charlie Javice, founder and CEO of Frank, an online FAFSA platform, told CNBC Make It, "It's really important as FAFSA season comes up that people don't forget that there is no such thing as being too rich to file FAFSA."

Javice said families who make more than $250,000 do not typically qualify for grants or subsidized loans but pointed out that a vast majority of Americans make less than $250,000. Being too rich "only applies to less than 5% of the U.S. population. Everyone should be doing it."

The second most common reason students gave for not completing the FAFSA was they missed the deadline, with 15% of those who did not complete the form giving this reason.

Each year, there is a nine-month period during which students can submit applications for both the current year and the future year. To avoid confusion, students should be sure to apply for aid for their upcoming school year as soon as possible.

Most students complete the FAFSA online, but students who choose to complete the application on paper should submit their documents so that a federal processor reviews them by June 30. According to Edvisors, if a FAFSA is received after the June 30 deadline, it will not be processed.

For those looking to avoid this challenge, here are the deadlines:

Students should also make sure they are aware of the deadlines for applying for financial aid from their schools, states and local governments. The Department of Education and Edvisors provide resources for students to check their local deadlines.

Of those who didn't complete the FAFSA, 8% said it was because the application was too complicated, 9% said they didn't have time, and 10% said they didn't have the necessary information they needed to complete the form.

In order to complete the FAFSA, students will need their tax returns, information about their family's bank accounts and assets, and the names of the schools they are interested in attending.

Over the past decade, the Department of Education has taken steps to make the form simpler and more intuitive, including redesigning the application website adding automatic error notifications if a field has been filled incorrectly. As of 2019, the FAFSA can even be completed on your phone.

To test these improvements, I filled out the revamped FAFSA form myself. It took about five and a half minutes. The IRS data retrieval tool makes it easy for students to automatically transfer their tax return information, so I didn't need to go searching for my returns. The banking information required was limited, so I didn't need to go searching through bank statements.

"I think [the Department of Education] has definitely made some strides," Sallie Mae spokesperson Rick Castellano told CNBC Make It. "The IRS data retrieval tool is a game-changer, and the ability to use your prior year tax return is huge."

Castellano said that though it can take closer to 30 minutes for some students to complete the FAFSA, "it's well worth it, given what you're getting in line for."

Finally, 14% of those who did not submit an application for free federal aid said they did not because they didn't know about the FAFSA.

If you need help filling out the form, be sure to check out CNBC Make It's step-by-step guide to completing the FAFSA.

The Department of Education says that online FAFSA applications are typically processed within three to five days, and that paper applications are typically processed within seven to 10 days. After an application is processed, students should receive a copy of their Student Aid Report, which includes their Expected Family Contribution and determines their eligibility for Pell Grants. An applicant's aid report will be shared with the colleges they listed on their FAFSA application.

Finally, students and families can appeal their results if their financial situation has changed.

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Students who don't fill out FAFSA are missing out on their share of billions in financial aid - CNBC