Total Pageviews

Friday, October 9, 2015

Financial Aid Application Major Changes!! 2015 is a key tax year!

In September, 2015, President Obama changed the rules for FAFSA to use the prior prior year (PPY).  For the 2016/2017 school year AND the 2017/2018 school year, the FAFSA form (Free Application for Federal Student Aid), which is used by nearly every college and university, the income portion of the family contribution will be based on the parents’ and student’s 2015 taxes.  Consequently, this year’s tax situation is VERY significant. 

It is critical that ALL families who will have students in college in the 2017/2018 school year, do everything possible to lower their AGI on their 2015 taxes.  Sometimes bonuses can be paid in January, rather than December.  Or contractors can be paid in January, rather than December.  Business expenses moved from January to December may lower the business income (either via Schedule C for sole proprietors or via K-1 earnings).  Meet with your tax preparer to discuss your options.  Use to estimate changes in your EFC based on possible scenarios.  And, be sure to keep everything legal.

As before, assets will be assessed as of the day of the initial filing of the FAFSA form.  For FAFSA, assets still do not include your home equity nor your retirement savings nor your life insurance.

This change has been advocated over the past several years by NASFAA, the National Association of Student FInacial Aid Administrators.

Expected Benefits

It is hoped that this change will enable families to file their FAFSA earlier by removing the need to wait until after January 1 to file it.  Starting in 2016, the FAFSA for the 2017/2018 school year will be available in October 2016, not January 1, 2017, as has been the previous pattern.  In turn, families will have an idea of their eligibility for need based financial aid, assuming they understand the Student Aid Report. 

Additionally, since the 2012 introduction of the DRT (Data Retrieval Tool) which enables filers to pull tax data from their filed tax returns to the FAFSA, there have been numerous problems with delays since returns had to be filed and processed before the data was available from the IRS.  With the use of the prior prior year’s tax information, FAFSA filers, even at the beginning of the season in October, will have had their tax returns filed (by April 15th) and processed.  Late filers may have to wait but will still be able to have the information available to pull into their FAFSA well before financial aid awards are issued in March and April. 

It is also expected that financial aid offices will be able to provide families their financial aid award offers sooner, thus providing potential students a longer opportunity to sort out the financial details before they must commit to a college on May 1.  Financial Aid Officers hope to have more time to counsel students since the awards will be prepared earlier, leaving more time before students and their parents must decide.

Currently, 30% of FAFSA filers are selected by the Department of Educatino for verification, which requires getting tax transcripts and dealing with other paperwork to the school(s) before they can issue a financial award.  This has caused a significant amount of extra work for the FAOs and delayed the finalization of some aid awards until the summer, well after the May 1 deadline.

If your income changes significantly in the year after the prior prior year, you will still be able to appeal to the financial aid office (FAO) to ask them to use professional judgment to use more current income to adjust your aid eligibility.  Of course, you’ll need to provide the more current information to the FAO with your appeal.

Some schools have already committed to changing their institutional financial aid forms to use the same data (called PPY – prior, prior year).  These schools include: the University of California system, Anne Arundel Community College, Loyola University, Michigan State University, Oregon State University, Stonehill College, University of Illinois Urbana-Champaign, University of Tennessee-Knoxville, Bennington College, University of  Nebraska-Lincoln, National Louis University, Marygrove College, and University of Texas-San Antonio.  For these schools, as well as all others which adopt this policy, no additional information is expected to be required.

It remains to be seen if some of the schools will require additional information about the prior year’s income on their own, institutional forms.  At this time, the PROFILE form required by some schools will not be changing.  Consequently, if your child applies to a school which requires the FAFSA and the PROFILE forms to both be filed, you will need the prior prior year information, the prior year information, as well as a projection for the future year.  For example, for the 2017/2018 school year, you’ll need 2015 information for both the FAFSA and PROFILE forms, 2016 tax information (or estimates, depending on your filing deadline) for the PROFILE form, and a projection of 2017 income for the PROFILE form.

If you need help filing forms or estimating net college costs, please send me an email.  I’d be happy to help you!

Katherine O’Brien, MA CCPS
Certified College Planning Specialist
America’s College Prep Specialist

No comments:

Post a Comment