New FAFSA changes can make applying for financial aid easier

WHAT IS FAFSA

Filling out FAFSA, the Free Application For Federal Student Aid, is an onerous task, detailed and time-consuming. A necessary evil, so to speak, for every college student, new and continuing, since the form must be filled out every year. As financial experts sized up the latest changes in the must-do form for seeking federal student aid, one piece of advice kept bubbling to the top: Parent, push up your college planning.

The fact that changes intended to make the form process easier should be good news for millions of families who at some point will grapple with the Free Application for Federal Student Aid, known as FAFSA. The form is used to estimate a family’s ability to pay for college and helps determine the amount of loans and grants potentially available to fill the gap.

WHAT ARE THE NEW CHANGES

Released in September, the two biggest tweaks to the forms are:

1. Starting in 2016, FAFSA will be available in October of the year before a would-be college student heads off to school. Currently, the form is available Jan. 1, so the three-month head start should relieve some of the filling pressure. Of course, this is only true if you actually do start the process earlier, rather than waiting until the last minute, like most FAFSA filers currently do.

2. FAFSA will rely on tax information from the last year all taxes have been filed, instead of from the current tax season, when families frequently need to submit revised income and other tax data to financial aid offices. This change is huge!

With this change, students will be able to apply for loans and grants using complete tax information and get an idea of how much aid they can expect. This should also make it easier to evaluate financial aid packages from various schools once the admission letters go out.

The changes will take effect Oct. 1, 2016, for students applying for financial aid for the 2017-2018 school year. So mark your calendars now for October to remind yourself.

While the FAFSA process can be long and overwhelming, the revisions could have a major impact by encouraging more eligible students to apply for and claim financial aid. According to the latest data from EdVisors.com, as many as 2 million undergraduate students did not even file an application in 2011-2012, even though they would have been eligible for assistance.

Mark Kantrowitz, publisher of the EdVisors financial aid website, said parents should evaluate the pros and cons of “artificially increasing” their income by realizing capital gains, taking distributions through retirement plans and other steps during the base tax year used for determining financial aid. In FAFSA terms, higher income translates to a higher expected family contribution. That’s always been his standard advice, “but now it has to be pushed up by a year,” he said. Under the new system, FAFSA’s base tax year will run from Jan. 1 of a student’s sophomore year in high school to Dec. 31 of the junior year in high school.

Ben Kaplan, a financial aid consultant and author, urged families to start getting organized with scholarship applications and college admission forms by September of senior year. “Families will need to measure their time more efficiently during the September rush period,” Kaplan said.

However, Kal Chany, co-author of the Princeton Review’s annual “Paying for College Without Going Broke,” is skeptical that many colleges, universities and scholarship organizations will follow through on a pledge to align their award schedules with earlier FAFSA filings. Nor does he expect schools to push up admission acceptance letters. Chany said the FAFSA changes also might create “unintended consequences of students turning in the forms early and being discouraged” by the financial numbers from going to college.

Does all this sound like FAFSA season has just been made easier? We’ll find out in a year. The important take-away is to mark your calendar to take advantage of the extra filing time, and to begin planning now for any tax implications on aid eligibility.