This
year, the financial aid application process has been significantly
changed. The Free Application for
Federal Student Aid, better known as the FAFSA, can be filed for the 2017/18
school year starting October 1, 2016.
Previously, the FAFSA was filed in the first few months of the
year. With the filing date change comes
a second deviation from the past: the use of the “prior, prior year” income
information. For the 2017/18 school
year, FAFSA filers will use their 2015 taxes.
These two changes have numerous implications for all college bound
families.
First,
families should receive their financial aid awards considerably earlier. This will give them several months to
determine how they will fund the upcoming school year. For those applying to college, alarming
changes to their financial aid awards well after the May 1 decision date should
be eliminated. In the past, numerous
families received very unwelcome news after having committed to a school.
Second,
families need to begin serious college planning much earlier. The financial aid base year is now the
calendar year which begins in the middle of sophomore year. Used well, this
information can help families avoid taking on crushing amounts of debt. Those working with me will
benefit even more from my expertise.
The
FAFSA is the financial aid form required by nearly every college and university
in the US. In order to be able to take federal student or parent loans or to
get any federal grants, the FAFSA must be filed. In California, the FAFSA must be filed by
March 2 in order to qualify for a CalGrant.
Additionally, most of the colleges and universities across the country
use the FAFSA results to determine how to distribute their own grants and
tuition reductions.
With
annual college costs exceeding $70,000 at a number of schools and many more
topping $60,000/year, even many wealthy families are qualifying for need based
aid. The FAFSA uses what is called the
“federal methodology” to calculate the EFC, or Expected Family
Contribution. In turn, financial aid
offices use the EFC to determine the aid they will award.
There
are two primary reasons for the filing date change. A few years ago, the IRS and Department of
Education introduced the DRT or Data Retrieval Tool. This tool enables filers to transfer their
tax information from the IRS database into their FAFSA. Unfortunately, the IRS
could not process returns fast enough to provide the data in a timely
fashion. As a result, some families committed
to a particular college or university, only to have their financial aid package
altered months later when their tax return data was finally available.
Additionally,
with the earlier filing period, financial aid offices will be able to provide
financial aid awards to families much earlier in the application process. Families will then have more time to
determine how to pay for the upcoming year of college. They will also have time to work with the
financial aid office to create a workable plan or to apply to additional
schools, if needed.
In order to make October filing happen, the income information had to come from what is called the prior, prior year. This is the calendar year before the calendar year that is finished before the year of school starts. For example, for the 2017/18 school year, the prior year is 2016 and the prior, prior year is 2015. By October of 2016, when families can file the FAFSA for the 2017/18 school year, the IRS should have been able to process their 2015 tax return. When the families use the DRT in the process of filing their FAFSA, the tax information should be processed and ready to be pulled into the FAFSA.
The
reason you need to start working with me during
freshman year is because of this shift to using income data from the prior,
prior year. Here's an example:
For students
who just started high school in August 2016, their high school timeline was
this:
2016/17 Freshman year
2017/18 Sophomore year
2018/19 Junior year
2019/20 Senior year
Their
first college year, assuming they go directly from high school to college, will
be 2020/2021. These students will apply
for college during the 2019/20 school year.
In October of 2019, they will also be able to file their FAFSA
form. 2018 will be their financial aid
base year, the year of income used by the FAFSA processor to calculate the EFC
(Expected Family Contribution). 2018 is
the prior, prior year to 2020, their first year of college. Take a look at those high school years
again. When does 2018 start? It starts in the middle of the sophomore
year. Therefore, any changes which would
be beneficial to a family’s financial aid eligibility need to be identified and
executed during 2016 or 2017, the freshman year.
Unfortunately,
most families don’t consider working with me until the junior
or, even, the senior year. With the
changes, college funding planning can start sooner, since families will be able
to know their EFC and financial aid eligibility a year earlier in the
process. With student loan debt
crippling so many college graduates’ lives, finding good colleges which are
affordable is more important than ever.
To schedule an appointment to discuss your particular situation,click here: LET'S MEET!
