Sensible Perspectives

Student Financial Aid: Newer, Faster, Better?

Posted by on September 20, 2016

Student financial aidThe Federal Student Aid office of the U.S. Department of Education recently published an advisory for parents of college students seeking federal financial aid. Three major changes are coming:

* Students attending college in the 2017-2018 school year will be able to submit the Federal Application for Student Aid (FAFSA) as early as October 1, 2016, rather than beginning on January 1, 2017. The earlier submission date will be a permanent change, enabling students to complete and submit their FAFSAs as early as October 1 every year, and as late as June 30. (There is NO CHANGE to the 2016-2017 schedule. The 2016-2017 FAFSA became available January 1, 2016, and submissions will be accepted through June 30, 2017.) [1]

* Beginning with the 2017-2018 school year, students (and parents, as appropriate) will be required to report family income data from two years prior to the academic year instead of one year prior (i.e., for 2017-2018, tax year 2015 income data would be required instead of 2016). This change is expected to continue in future FAFSA submission years.[1]

* FAFSA applicants will soon be able to electronically retrieve their income and tax information directly from the IRS as part of the application process.

Moving up the first available submission date by three months (from January to October) is designed to make it easier to apply for federal student aid by giving students more time to submit the FAFSA. Requiring students to submit income data from an earlier year — what some call the “prior-prior” year –is meant to serve two purposes: First, it aligns the financial aid process with the typical college admissions cycle. Second, it aligns better with the income tax preparation cycle. Previously, the form that was available January 1 required income from the tax year just ended.[2] However, that year’s tax return hadn’t been completed yet, and people didn’t always know their total annual income yet. As a result, sometimes students would have to revise the form, only adding to the red tape and drudgery of the application process. The alternative was just to file the FAFSA later, once income tax returns had been completed, but students would then risk missing out on some aid. Requiring two years’ prior year income data eliminates the need to re-verify income later in the application process.

Using income data from two years also allows students to use the Internal Revenue Service’s Data Retrieval Tool, which automatically fills in the online FAFSA form with the necessary tax information,[2] further simplifying the application process. The FAFSA form provides a link to this tool.

These improvements don’t come without potential pitfalls. Now that the FAFSA start date has been moved up by two months, the Department of Education is encouraging colleges to provide notification of priority financial aid awards to students earlier in the admissions process so that they can make better-informed decisions about where they can afford to enroll. This has, in turn, put pressure on colleges to move up their financial aid application deadlines. A deadline too soon after the FAFSA October 1 start date would put undue pressure on students (especially students from low-income backgrounds) who are already knee-deep in the college admissions process. So far, only a limited number of institutions have moved up their financial aid deadlines, but parents and students should be alert to any timeline changes in the financial aid process at colleges they are considering. As the college financial aid deadlines get closer to the October 1 FAFSA submission start date, students should consider the college application and financial aid processes as one big project instead of separate ones.

We can hope that these changes are just the first step in making the financial aid application process much simpler. Ideally, students would have to complete the FAFSA only once instead of every year. However, that appears to be wishful thinking for the foreseeable future.

[1] www.studentaid.ed.gov/sa/resources/2017-18-fafsa-process-changes-text

[2] www.bostonglobe.com/business/2016/08/10/new-fafsa-date-offers-chance-simplify-aid-filing/