New FAFSA Rules For Financial Aid
Feb 02, 2016
Colleges and universities seem to be sending out acceptance letters earlier and earlier each year. Students are often accepted but have no idea how much financial aid for which they may qualify. The Free Application for Federal Student Aid, or FAFSA is available for completion on January 1 of each year and helps determine a student’s eligibility for financial aid. A portion of the FAFSA requires information from the just-ended year’s income tax returns for both the student and his/her parents. Often times, the information needed to prepare tax returns does not arrive until much later in the tax season, thus resulting in the tax returns being filed much closer to April 15. Students completing the FAFSA early on are asked to use estimated amounts, and then at a later date file reports with the corrected amounts. As a result, those students who wait to file their FAFSA forms may find themselves losing out on valuable financial aid dollars to students who filed much earlier.
However, this ritual will change this fall due to changes in the FAFSA rules effective for the 2017-2018 school year. The FAFSA website will open three months earlier—in October of 2016. More importantly, students will report income from an earlier tax year i.e. the 2017-2018 application will request tax data from 2015. The FAFSA online site has an IRS Data Retrieval Tool, which can pull the income tax data directly from the IRS into the FAFSA form.
Due to the changes, the 2015 income tax information will impact financial aid calculations for two years, both the 2016-2017 and the 2017-2018 FAFSA applications. For a summary of key dates during the transition check out the Department of Education’s website.
The changes are designed to allow students to complete the application and apply in a timely manner, and encourage colleges to provide information on financial aid at an earlier date.
By: George Monger, CPA
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