Thursday, September 8, 2016

New FAFSA, New Timing

New FAFSA, New Timing

Imagine shopping for a new car and having no clue until the moment you pull out your credit card or sign the lease agreement what the vehicle will cost. College list prices, like those for cars, are readily available on websites, but what a family will actually pay is often a mystery until only a few weeks before a student must make a decision.  The lack of transparency in the cost of attendance has been a common gripe among families of college going students. This year the federal government decided on a simple though limited fix: move the availability date for filling out the Free Application for Federal Student Aid, or FAFSA, from January 1st to October 1st of the prior year.  Submission of the FAFSA is required in order to be eligible for all federal aid, and many colleges also use it as the primary determinant for allocation of their institutional need-based aid. The change goes into effect on October 1, 2016, just a few weeks from now. The actual impact on colleges and families is still not fully clear, but the change in timing should make filing the FAFSA easier and less of a scramble.

What eases the burden of completing the FAFSA is the move to prior prior year income reporting.  No longer will parents be pressed to estimate adjusted gross income in January for the calendar year just ended, often weeks before receiving W-2s and other necessary statements for filing taxes. Families of students applying for financial aid for fall 2017 will be asked to report their 2015, or prior prior year income instead. Most filers can take advantage of the IRS Data Retrieval Tool and, by merely clicking the Link to IRS button on the FAFSA, populate the required fields with their income data.  The timing of asset reporting will not change, meaning that parents and students will still report balances as of the date the FAFSA is submitted.  

The change in FAFSA timing accelerates some, but not all aspects of the college process. Applying for financial aid is now done concurrently with applications to colleges rather than two or three months later.  Families will benefit by no longer having to estimate income and update the FAFSA at a later date.  The earlier date also encourages students and their parents to address financial need and expectations earlier in the process.

Yet the question remains: will the advent of prior prior year income and the early FAFSA availability actually accelerate financial aid decisions to truly assist a family’s college planning? It’s too soon to tell.  Many colleges are moving up their deadlines for submitting financial aid forms to coincide with the FAFSA and CSS Profile’s October 1 availability date (the CSS Profile is an additional form required by roughly 400 primarily private colleges).  But are families really likely to know their financial aid packages sooner? Not unless admission decisions are accelerated as well.  Financial aid awards generally accompany or follow notification of acceptance. Clearly more will have to change than merely making it easier for families to complete and submit the FAFSA earlier. Under the current system, it’s unlikely that the timing of financial aid notification will change materially. 

Nevertheless, families would be wise to take advantage of the earlier filing date and get the forms submitted as soon as possible.  Checking financial aid requirements on each college’s website is necessary in order to confirm and meet the anticipated earlier deadlines.  It will probably take a few more tweaks to the process before families will be able to truly gauge the cost of college well in advance of making a final decision.