New FAFSA Changes Could Get You More Financial Aid
Due to some recent changes to the FAFSA (Free Application for Federal Student Aid) filing process, if you have kids attending college during the 2017-18 school year, there’s some important new information you’ll want to know.
The FAFSA is used to determine how much financial aid students are eligible to receive in the form of loans, grants, work-study programs and scholarships from the federal government. If your son or daughter is going to college next fall, here’s what you need to know:
1. The application date is earlier.
Applicants can now apply for federal student aid on October 1st, three months earlier than in previous years. Procrastinators, take heed: Take advantage of the earlier start date, as financial aid is often given out on a first-come, first-serve basis. Filing early could mean more money for college for the next school year. Additionally, many colleges have also moved up their financial aid application deadlines to coincide with the new FAFSA date; check your student’s college’s financial aid web pages to avoid missing important deadlines.
2. You’ll apply with earlier income information.
For the first time, applicants will now use tax information from two years prior to the academic year in which they plan to attend school. For example, students applying for aid for the 2017-18 school year will use 2015 income. This change means that applicants will no longer have to guess on their FAFSA application when reporting the prior year’s income.
The good news is that this change should make applying for federal financial aid easier than ever. Instead of entering tax information manually, applicants will be able to transfer their 2015 tax data to the FAFSA with the IRS Data Retrieval Tool.
3. You’ll have greater flexibility with 529 plans.
When a student receives help paying for college through 529 plan funds (an education savings plan), it’s counted as income of the student on the FAFSA. In years past, family members who wanted to contribute often waited until the student’s junior year, after the last FAFSA was filed, to avoid having to declare the extra income. Because this year students will use “prior-prior-year” income information, family members can now use 529 accounts as early as the student’s sophomore year without impacting financial aid eligibility.
Year after year there are billions of dollars of federal grants left on the table because high school grads aren’t completing the FAFSA. Do yourself and your kids a favor by completing the FAFSA early this year. You may be pleasantly surprised at the outcome.