Are you a high school senior? Or the parent of one?
If so, applying for financial aid is likely on your list of things to do this year.
The Free Application for Federal Student Aid, better known as the FAFSA, is the most important financial aid application you’ll complete. Unfortunately, the FAFSA is also a source of stress for many students and their parents.
There’s good news, though. This year some new FAFSA rules have been put in place that make completing and submitting the FAFSA a whole lot easier. They may also help you in other ways.
In this post I’m going to:
- describe the new FAFSA rules;
- talk about how they’ll affect you; and
- explain how you might use them to your advantage.
The FAFSA changes were announced in September of 2105. They affect anyone starting or attending college in the 2017-18 school year.
There are two major changes.
To understand them, let’s do a very quick review of how financial aid works.
How Financial Aid Works – Quick Review
The amount of financial aid you get is based on your financial situation, or your “financial need.” Colleges have the job of not only calculating your financial need, but also deciding how much and what types of financial aid you will receive to help you with that need.
The calculation is pretty simple. A college subtracts how much you’re able to pay from how much it costs to go to that college.
Here’s what it looks like.
The “how much you can pay” number comes from the federal government. They calculate it using the financial information from your FAFSA. That number has an official name; it’s called your “Estimated Family Contribution” or EFC.
Here’s how the process works.
Let’s say you’re a high school senior applying to Clarkson University.
Your first step is to complete and submit your FAFSA. The federal government takes your FAFSA information, enters it into a formula, and comes up with an EFC of $30,000. Remember, your EFC is the amount you and your family can pay toward your college education.
The government then reports your EFC of $30,000 to Clarkson College.
The Clarkson financial aid office takes your EFC and subtracts it from the cost to attend Clarkson, which they already know is $60,688. The result is your financial need: $30,688.
Essentially, this means you’ll need an additional $30,688 (which you don’t have) to afford college that year.
The next thing Clarkson does is put together a financial aid package to help cover your $30,688 of financial need. Most colleges won’t cover the complete amount, but they will try to help as much as possible.
What you don’t see here is a timing issue that makes this whole process difficult and stressful.
Clarkson College requires you to submit your FAFSA by February 1. This means both your taxes and FAFSA have to be completed by that date. The problem is, most people won’t have the tax forms and information they need until after February 1.
To handle this timing issue, colleges recommended that you estimate your tax information and use that for your FAFSA. The plan was that you would update your FAFSA later when your taxes were done.
The New FAFSA Rules
Regardless of how the FAFSA was done, the timing was crazy and created a great deal of stress for parents, students, and colleges. The process was even worse if a student applied early decision or early action.
Fortunately, the new FAFSA rules should solve that problem.
Here’s what the timeline looked like before the rules went into effect.
Here’s how the FAFSA rules change with the 2017-18 and 2018-19 school year (in yellow).
Here are the two changes.
1) You can now work on and submit your FAFSA two months earlier, beginning October 1.
This is especially helpful to students applying early decision or early action.
2) You can use your previous year’s completed tax returns.
This eliminates the pressure to get your current year’s taxes and the FAFSA done at the same time and by the deadline. It also avoids the hassle of estimating and later correcting your tax information.
You can find more information on the new FAFSA rules at What You Need to Know About the 2017-18 FAFSA
An FAQ page is also available at Changes Impacting the 2017-18 FAFSA
How the New FAFSA Rules Can Help You
Usually when things change, other things change in response. Here are some things to look out for.
1) There could be an advantage to submitting your FAFSA earlier. Before the changes, everyone’s FAFSAs were submitted at about the same time because of taxes.
Now, with the longer window, you can submit your FAFSA earlier, when colleges have more financial aid available.
Some colleges also increase financial aid to encourage students with particular profiles or interests to enroll. For example, a student may get more financial aid if they have a specific talent, are from a certain region or state, or plan to major in an underrepresented area. A student with those same characteristics who files their FAFSA later will miss out.
2) If you’re a parent whose income varies from year to year, you will need to do some advanced planning. If you’re applying for financial aid for the 2017-18 school year, there’s not much you can do. Financial aid that year will be based on your 2015 tax returns. But you do have time to plan your finances for 2016 to maximize your benefits for 2018-19.
3) We don’t yet know how colleges will react to the FAFSA changes.
The earlier FAFSA starting date may encourage colleges to use earlier deadlines so they can better manage the enrollment process. Either way, make sure you have the most updated information. Check the college’s website, and not guidebooks or other publications, for the correct dates.
4) With the new FAFSA rules, your financial aid is determined with tax information that is almost two years old. If your financial situation changes drastically, you will need to contact the college’s financial aid office.
This can be good or bad.
If your finances have changed for the worse, you can appeal your award and possibly receive more aid. On the other hand, most colleges make you sign a document when you receive your award in which you agree to tell them of any change in your financial status and/or if you receive additional earnings or support. This may lower your future financial aid awards.
The new FAFSA rules that go into effect this year will definitely make it much less stressful to apply for financial aid. However, even though these new rules will make it easier to apply for financial aid, they may have other impacts and advantages, including financial ones, which you shouldn’t overlook.