In my June 29 post I wrote about forthcoming changes to the FAFSA, the financial aid form that must be completed by students and their families seeking federal aid to pay for college. This also includes anyone who wishes to borrow under the federally guaranteed Stafford loan program, whether for need based or the non-need based loans. The new and improved FAFSA for the 2010-2011 academic year will come online January 1, 2010 and can be accessed at http://www.fafsa.gov/ (do not confused this with http://www.fafsa.com/ which is NOT the Department of Education, but rather a site that will charge users for access and services!).
The soon-to-be-released version of the FAFSA should be easier to complete, as it will incorporate help text and instructions for specific questions as well as enhanced skip logic. That means you probably will no longer have to wade through pages of questions that are irrelevant to your circumstances. In addition, families will now be able to populate certain fields with tax return information retrieved directly from the IRS, a feature which will eliminate some 20 questions.
The objective of the FAFSA revision is simplification. So not surprising, one of the most frequently touted benefits to the new form is the ability to access your filed tax return to complete sections of the FAFSA form (a feature that will become available in January to those applying for spring 2010. It will be rolled out to all users later next year). A simple “Click Here” displayed in the income section for both the parents and the student instructs FAFSA to get your federal income tax information directly from the IRS. If you choose to use the IRS access feature you will no longer have to search for and re-calculate income data in order to complete the FAFSA. Much of what you need will come automatically from your filed return.
While this sounds like a vast improvement to a daunting form, the option of using financial information taken directly from the IRS may be a lot of hoopla that will have limited benefits in practice. Here is why.
As I noted in my June post, the information taken off your tax return is dated. If you fill out the FAFSA as soon as it is available on the website (January 1 every year for the school year beginning the following fall) in order to meet schools’ deadlines, you will be accessing a tax return showing income from two years prior. Once you retrieve data from the IRS and use this for your FAFSA, you can neither amend nor update it. The way the FAFSA completion process currently works, most people use income estimates and then update with actual numbers after the relevant tax return is filed. Using your tax data is not recommended for those married, but filing separately since only one tax return can be accessed. If your marital status has changed since your last filed return, you cannot choose this option.
Perhaps the greatest shortcoming to using your filed tax return is the fact that colleges will still want to see current financial data. So in the end you will find yourself gathering this information for the schools anyway. Furthermore, there are nearly 600 colleges and universities that require the CSS/Profile form for the purpose of allocating their institutional resources for student aid. That form has not been revised, so families will still be required to submit all of the financial data they had before.
Bottom line: don’t get too excited about the improvements to the FAFSA form yet. True, the skip logic and enhanced labeling and instructions should reduce the number of questions and some of the confusion. But in the end, most people are not likely to see any measurable reduction in the amount of financial data they are required to provide.