FAFSA Changes are Coming – Will They Help You?
FAFSA changes were announced this week that will impact students applying for aid for 2017-2018, including this year’s high school juniors applying for college admission for Fall of 2017. As most of you know, FAFSA is the Free Application for Federal Student Aid that is used to determine how much financial aid a student is eligible for, both through the government, in the form of grants and loans, and often also directly through the college, in the form of need-based scholarships and grants. How will these changes impact you? First, let me summarize the changes.
FAFSA Changes for 2017-2018
- Use tax data from two years prior – Students applying in Fall of 2017 will use tax data from 2015
- Filing period is changed to open on October 1 instead of January 1 – For Fall of 2017, this means students can file FAFSA starting Oct 1, 2016.
So what does this really mean to you if you have a student impacted by these changes?
Major Impacts of FAFSA Changes
- FAFSA will be easier to file – Most students and parents will be able to use the IRS data retrieval tool to fill out tax information. The FAFSA filing will be based on tax information from federal income taxes that were due April 15 of the current year (FAFSA available 10/1/2016 will be based on the tax filing from 4/15/2016).
- You can be more accurate – Under the current FAFSA system, you are filing FAFSA using tax data that is due April 15 of the current year. With FAFSA becoming available January 1, you either have to do an early “guesstimate” of your taxes in order to get the FAFSA in early, or wait to file FAFSA until after you file taxes. If you used a “guesstimate”, you were supposed to go back into the FAFSA application after filing your taxes and submit a corrected form. Under the new system, the need to guess and to do corrections should be eliminated for most families.
- Timing becomes less of a factor for getting need-based aid through the college – Under the current FAFSA system, most schools encourage families to file early when the application becomes available January 1, yet parents struggle with having their tax information completed. Schools often say that they give out financial aid to students in the order that applications are received until the money is gone. With the FAFSA changes, there will no longer be a reason to wait to file to be more accurate (unless you are unable to file your taxes on time each year). You should be able to complete the application as soon as the filing period opens.
- Old data may mean more aid – Most families see a rise in income each year. If that is the case, using data from two years prior may make your student eligible for more aid.
- Aligns better with college application process – Given that most high school seniors and their parents are focused on the college application process in the fall, FAFSA has always been something you had to remember not to forget about after the start of the new year. With FAFSA becoming available October 1, 2017, this will align with the college application process so you can get it all done at the same time.
Of course, there will be cases where using older financial data does not accurately reflect the family’s current financial hardships. Families in this situation will need to work directly with the colleges, as they have to do under the current system, to explain what they are facing and why the college should provide more need-based aid.
On the flip side, if you aren’t expecting to qualify for need-based aid under the current system, these FAFSA changes probably won’t mean much to you, although filing the FAFSA is still the only way to be eligible for federal student loans. If you think there is even a very slim chance your student will need a loan, it’s best to file FAFSA to allow you the option of a federal student loan (federal loans often carry the lowest interest rates available).