Timeline changes for filling out form for financial aid

September 6, 2016

Labor Day weekend is the unofficial end of the summer season and when college students make their way to campus to start the academic year. It is also the time when these students, their parents and the parents of incoming high school seniors will be thinking of financial aid and the new process of applying for assistance with college expenses.

Prior to this year, college financial aid seekers would complete the Federal Application for Federal Student Aid (FAFSA) after Jan. 1 for the upcoming fall/spring academic year. (Example: The FAFSA would be submitted in January of 2015 for the 2016-2017 academic year, using estimated information from the 2014). This year, the start date for submitting the FAFSA has been moved forward to Oct. 1 instead of Jan. 1 and the family financial data used will be from the recently and already filed tax return instead of the old method of estimating.

This means that aid awards for the 2017-18 academic year will be based upon filed 2015 data and not 2016 estimated income and asset values. For the next year (2018-19), the FAFSA can be filed in October 2017 and will use 2016 filed data. In addition, the online FAFSA tools will allow families to use the IRS Data Retrieval Tool to import their filed income and tax information directly from the IRS database onto the FAFSA form.

The goal of the change is to help eliminate the confusion and double work of estimating prior year’s income and asset values to complete the forms, then go back and revise the applications if the actual numbers differ substantially.

The new process also may help reduce parent anxiety and inaccuracies in the applications as well as the verification step many colleges use afterward. The earlier application period also may allow colleges more time to review family finances and consider aid awards and families of high school seniors also may have more time to consider which colleges fit their budget.

Another significant change this year is in the actual formula used by colleges in assessing family finances. In the formula, there is a provision sheltering a portion of parental asset values from assessment and what the family is expected to contribute toward college costs. This “asset protection allowance” will be significantly reduced beginning this year, in some cases by 40 percent.

While seemingly alarming, it’s important to realize the majority of assessment for most families comes from parental income, not assets, since the assets of most families are in their retirement accounts and home equity, which are not counted.

On a positive note, starting this year, colleges reviewing aid applications from potential incoming freshmen students no longer will see the other colleges on the application competing for the student’s attendance. Previously, the student could list up to 10 colleges on the FAFSA who would receive the family’s financial details.

From this insight, schools could choose how to structure their award offer to the student to either increase their appeal to the family or not over-promise aid to others. Without this information now, colleges may have less leverage in their offers.

For more information on these changes, visit www.studentaid.gov.