Important news on the FAFSA®
This past Sunday, President Obama announced an important change to the Free Application for Federal Student Aid (FAFSA), the main application used to apply for college financial aid. Beginning in October 2016 and applicable to the 2017-18 FAFSA, students will be able to complete the FAFSA using income from two years prior (referred to as prior prior year income), rather than one year prior, as is now the case. This change will make the entire financial aid process smoother for both families and colleges.
How the FAFSA works now
Currently, when students submit the FAFSA, they report parent and student income totals from the previous calendar year. So a student submitting a FAFSA for the 2015-16 academic year reports 2014 income totals, taken from federal tax returns. As the FAFSA is often due to colleges in February or March, many families are forced to answer income questions without a completed tax return. This means the FAFSA needs to be updated once taxes are filed, and financial aid offers from colleges are put on hold or contain only estimated figures.
What will be different
With the new change, families submitting a 2017-18 FAFSA, which will be due to colleges in early 2017, will be asked for income totals from 2015, rather than 2016.
Why this is great news
As most families will have a completed 2015 tax return when the 2017-18 FAFSA becomes available, answering the parent and student income questions will only require a quick glance at the tax return. As well, most families will be able to use the IRS Data Retrieval Tool, which allows an individual to pull tax return data electronically from the IRS into the FAFSA, making the process of completing the application much simpler. It will also eliminate the need for many families to submit additional income documentation to colleges.
How timing will change (more great news)
The FAFSA in the past has become available to families on January 1 for the upcoming academic year, but this change will allow the FAFSA to open earlier, in October, which will give financial aid offices more time to determine financial aid offers and also provide them to families earlier in the year.
This change will not affect the 2016-17 FAFSA, so anyone attending college in the 2016-17 academic year, including current high school seniors, will not yet experience this modification within the FAFSA process. But come October 2016, families with a student attending college in the upcoming 2017-18 academic year will notice this change.
You can view the White House's Fact Sheet on this announcement here. And as any additional changes are made on this topic, or others related to college planning, we'll keep you posted. Refer back to our News section often to stay updated as you and your family plan for college.