Monday, June 29, 2009

Changes to the FAFSA: Sooner Than You Think

For those of you who have struggled through the dreaded process of filling out the Free Application for Federal Student Aid, or FAFSA, in order to be eligible for financial aid or just to apply for unsubsidized Stafford loans, take heart. The Department of Education announced last week that it intends to substantially modify the process by making the FAFSA shorter, simpler and more user-friendly.

This streamlining will take place in 3 steps:
- Beginning this summer, enhanced skip-logic on the web-based FAFSA will allow applicants to bypass many more questions that are irrelevant to their situation. For example, students who are married or 24 and older, and therefore considered independent, will no longer have to answer questions about their parents’ finances.

- In the second phase, the Department of Education will ask Congress to pass legislation allowing the elimination of numerous questions that ask for financial data not found on tax returns. The department claims that since much of this information is not verifiable, especially that pertaining to assets, it adds little value to the process of awarding aid. So expect to see many of the asset questions discarded should Congress agree to the changes…no more reporting home equity which actually counted little towards the Expected Family Contribution anyway.

- The third step will be rolled out first as a pilot program to students applying for aid in the spring term of 2010. The program will allow students to populate 18 questions on the revised form with data retrieved from their most recently filed tax return. Why use this target group? Keep in mind that most of us have not yet filed our tax returns by the time we are required to submit the FAFSA to schools in early February in order to meet their financial aid deadlines. We complete the form as soon after January 1 as possible using estimates, to be updated with actual tax return data at a later date. Those applying for financial aid for the spring term start the process several months later, after the April 15 tax filing date. Again, this is only a pilot program. Questions still abound as to whether this will be a fair measure of need since using the last filed tax return in most cases for those filing for fall will mean relying on information that may be up to two years stale. One potential consequence is that colleges and state institutions cease to rely on the FAFSA and institute their own forms if they believe the information is too dated to be meaningful.

Will these changes be sufficient to generate greater accessibility to students or do they go to far? While that is being debated. some streamlining is already in the works, and that’s the good news for those who do not eagerly anticipate completing another FAFSA form come January 1, 2010.

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