Faster FAFSAs

As the parent of two former college students, I recall my FAFSA days (or should I say “daze”?) with not-so-fond emotions. Filling out financial aid forms was a form of procrastinated drudgery that I don’t think about with nostalgia.

Both of my children went to private colleges. That resulted in the Terrible Trio, as I called them: FAFSA, CSS Profile, and the colleges’ own financial aid forms. These three onerous paperwork mountains stood peak-to-peak with my IRS 1040 every first quarter of the year. Knowing what shortly awaited me, took the edge off those eight New Year’s Eve celebrations during my kids’ college careers.

Times change, though, and sometimes for the better. If you are the parent(s) of a high school senior headed for higher education next year, you may not have heard about the changes in store for the the “main” financial aid form that families must fill out: the FAFSA. That acronym (not a very good one, in my view) stands for the “Free Application for Federal Student Aid.” If you’re clueless about what a FAFSA is, you can read all about it here.

The big news is that the Obama Administration has made changes to the FAFSA that will become effective in October of 2016 (just a few days away). These changes will have a big impact on families with high school seniors, as well as those with younger children.

Okay, then. What are these changes? From the source:

  • Students will be able to submit a FAFSA® earlier.  Students will be able to file a 2017–18 FAFSA as early as Oct. 1, 2016, rather than beginning on Jan. 1, 2017. The earlier submission date will be a permanent change, enabling students to complete and submit a FAFSA as early as October 1 every year. (There is NO CHANGE to the 2016–17 schedule. The FAFSA became available January 1 as in previous years.)
  • Students will use earlier income information. Beginning with the 2017–18 FAFSA, students will be required to report income information from an earlier tax year. For example, on the 2017–18 FAFSA, students (and parents, as appropriate) will report their 2015 income information, rather than their 2016 income information.

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This is good news, as witnessed by some of the comments from the College Confidential forum posters:

– … the bonus is that 2015 tax return info should be ready to be imported with the IRS retrieval tool as soon as you can file FAFSA in October.

– It has been on the Yahoo news feed a lot in the last few weeks. I’m sure I get it because of cookies on my computer and it being discussed on CC a lot. Colleges are aware of it so will be telling students to file in October. High school guidance counselors know about it.

– If the student doesn’t file the FAFSA until Jan or Feb, that will still be fine, but the instructions will tell you to use 2015 tax data when filling out the forms.

As Forbes also explains:

… Under the changes, students who are high school seniors next October (2016) will be able to apply for financial aid for their freshman (academic) year of college in 2017-2018 by submitting the FAFSA in October 2016 using income tax information from their parents’ 2015 tax returns.

This new method is referred to as prior, prior, because students’ college financial aid eligibility will now be based off of income from two years prior to when a student enrolls in college, not one year prior the way the rule has been until today.

Today students complete the FAFSA with the prior year’s income as their so-called base year–meaning the year on which  the first year of college aid is based.  While aid can change through college with a family’s finances, that first year of aid is crucial to the decision of where a student will go to college.  With financial aid deadlines between January and March, high school seniors often must complete FAFSA using estimated income numbers because their parents don’t have their tax returns completed for the prior year. When those tax returns are filed, applicants must then go back and update their FAFSA information. This holds up and complicates the financial aid system for students, parents and colleges, so this change is not only long overdue, but welcome—unless, that is, you have a high school junior and you just sold stocks in 2015 while markets were at all-time highs …

fafsa october

If you’re trying to decide for yourself whether or not these changes are beneficial, here’s what the Feds say:

How will the changes benefit me?

We expect that you’ll benefit in these ways:

• Because the FAFSA will ask for older income and tax information, you will already have done your taxes by the time you fill out your FAFSA, and you won’t need to estimate your tax information and then go back into the FAFSA later to update it.

• Because you’ll already have done your taxes by the time you fill out your FAFSA, you may be able to use the IRS Data Retrieval Tool (IRS DRT) to automatically import your tax information into your FAFSA. (Learn about the IRS DRT at StudentAid.gov/irsdrt.)

• Because the FAFSA is available earlier, you may feel less pressure due to having more time to explore and understand your financial aid options and apply for aid before your state’s and school’s deadlines.

Forbes‘ comments show additional benefits:

– This change does so much more than make it easier to apply and receive financial aid. It may confuse things on the front end for HS juniors and younger (especially if CSS/Profile doesn’t change) but on the back end, the last FAFSA income year allows grandparents to contribute without destroying need based aid a year earlier. Also, since October (and September) tends to be a down month in the stock market, stating assets at that time may be better than after the January effect …

– [The article author’s comments regarding a family dealing with capital gains …]: Just to be clear, there isn’t more research to do on how this will impact you. Based on your comments about selling and realizing gains that will spike your income, this change will impact your income and therefore your expected family contribution (EFC). However, if your income and assets were too high to begin with, or your child is not going to a real expensive college, then your child may have had an EFC that exceeded the cost of attending the college to begin with, and wouldn’t be eligible for need-based aid regardless of your sale and Obama’s FAFSA change. And again, if the college requires the CSS Profile, it may be a mute point anyway. Lastly, this income spike is just for one year and you’ll have to complete the FAFSA (and possibly the CSS) each year, which means that spike in income won’t show up in subsequent years and also spike how much you’ll be expected to pay toward college costs.

Once again, keep in mind that filing the FAFSA, regardless of how much easier and more beneficial it is now, could be just one of three financial aid forms. Most private colleges and universities also require the CSS Profile, which, unlike the F(ree)AFSA, requires a submission fee.

Also, as I mentioned above, many private schools also require their own institution-specific financial aid form. That’s where I got the term “Terrible Trio.”

css profile - file

Not to get off the FAFSA topic here, but just to make you aware of what the CSS profile requires in the way of preparation — in addition to FAFSA prep — here’s what you should expect:

What you need to know before you apply for financial aid

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  • View this interactive presentation before you start your PROFILE application.
    The minimum browser requirements to view the presentation are Internet Explorer 9+, Chrome 21+, Safari 5.1+, Firefox 14+, iPad 5+, and Android tablet 4.1+.
  • Have all tax forms and documents ready.
  • Use a secure browser and a valid credit card.
  • If you are a returning student, sign up with the same username you used to submit your PROFILE application last year (2016-17) and we’ll automatically fill in some of your information.
  • First year, first-time students who took the SAT should log into PROFILE using the same credentials used for the SAT.
  • PROFILE fee waivers are available to first year, first-time domestic students from low income backgrounds. Students who used an SAT fee waiver may also qualify for up to 8 PROFILE fee waivers.

finaid forms generic

Since I’ve mentioned the CSS Profile, I should also note a detail or two about institution-specific forms. Here is an excellent summary:

… Colleges and universities may require the student to complete supplemental financial aid forms and applications for the purposes of awarding institutional or private student aid funds. Institutional aid applications allow colleges and universities to distribute scholarship and other financial aid from the school’s own resources. Some of these scholarships and financial aid programs have special data requirements that are not necessarily collected by the two national application forms, the FAFSA and CSS/Financial Aid PROFILE. Some colleges use their own financial aid application instead of the CSS/Financial Aid PROFILE.

Institutional financial aid application forms are often very detailed in their requests for data. For example, the school’s financial aid applications might ask questions about the student’s religious affiliation, academic major and previous employment history (if any). Some institutional financial aid application forms ask about any special circumstances the student and/or family does not believe were adequately explained on the FAFSA or the CSS/Financial Aid PROFILE, such as unreimbursed medical/dental expenses, job loss and high dependent care costs for a special needs child or elderly parent …

I have highlighted a headache-inducing sentence, as you can see, and just to put a little icing on the financial aid form cake:

… Most states use the FAFSA to award state grants and other state student aid, but some states require additional forms. See if your state is one of them …

Oy.

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Good news and not-so-good news, then. The good news is that you can fill out your FAFSA early and use known income tax data. No need to do that annoying estimating. The not-so-good news, for those of you parents with a child headed to a private college, is that you’ll likely be encountering the CSS Profile and possibly a third school-specific aid form. Your state may also require a form for grants that are available.

Cheer up, though. You’ll have to do this only four times … unless you have more than one child … and unless they’ll be heading to graduate school, med school, dental school, business school, or …

“Just shut up, Dave!” Okay. I will.

Happy finaid-ing, everyone!

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