What is fafsa and how does it work?

Hi, Jessi. To Kim's earlier point about federal grants, although the FAFSA is critical to demonstrating Pell eligibility, it is the institution that awards it. (FAFSA results are forwarded to the institutions that you specify on your application.) There are limits to how much an institution has to award, and once the funds are distributed for the year, there simply isn't any more aid to be found through that particular channel for that year--and the FAFSA application must be submitted every year, not just before you begin school. The FAFSA is also the guideline for many school-specific grants, and those are also often first-come, first-served. I recommend that you get your FAFSA in as early as possible each year so that your school receives it early in the allocation process and you receive full consideration for all funding available. Also be sure to check out separate school-specific funding that may have separate application processes so that you hit those deadlines. Good luck! 

FAFSA is a form used to calculate how much you, and your parents, can afford to pay for your college education. It takes into consideration how much money you earn, how much assets you have, normal living expenses, and the cost of an education at the schools you are going to. It then determines how much financial assistance you will need. It is sent to the financial aid office of the schools you selected. You will still need to apply for financial aid at these schools, following their financial aid application process.

I think, but am not sure, that FAFSA will automatically consider you for federal grant money, if you are eligible. You will want to go to their website for further information.
Best of luck to you!