19 Oct What the new FAFSA rules mean for you
Kathryn Flynn, savingforcollege.com
If your child is heading to college next fall, it’s time to start thinking about how you’re going to pay for it. If he or she will be attending a four-year, in-state public university, you could be looking at total room and board costs of over $88,000, based on data from the College Board and assuming a 3.5 percent annual inflation rate. And if you’re thinking about a private school, four-year costs could exceed $200,000. It’s not surprising that most families will need to rely on a combination of savings and financial aid to cover the costs.
Many parents have been investing for college using 529 plans, but even diligent savers often come up short when it’s time to pay tuition. One of the best ways to supplement savings is with grants, loans or work-study funds in the form of Federal Student Aid. Each year, the U.S. Department of Education hands out over $150 billion to more than 13 million college hopefuls. To determine if you’re eligible to receive this kind of help you’ll need to complete the FAFSA (Free Application for Federal Student Aid. Sounds simple, right? Yet, in 2011-2012, around $9.5 million in Federal Pell Grants and $2.9 billion in state and institutional grants was left on the table because students chose not to fill out the FAFSA, estimates Edvisors.
What once used to be a major headache for college students and their families, the FAFSA has undergone some major changes for the 2017-18 school year that should help ease some of the pain. Here are five important things to know about the updates.
- You can now apply for federal aid three months earlier. Instead of having to wait until January to submit their FAFSA, students can apply for aid as early as October 1st. Some colleges have also moved up their financial aid application deadlines to correspond with the new FAFSA date. Students would be wise to get a head start on their applications, as financial aid is often given out on a first-come, first-serve basis so getting an early start can pay off.
- The CSS Profile application kickoff also moved up. The CSS Profile, which is required by around 300 private schools, in addition to the FAFSA, will also be available October 1st. This form varies by school, but in most cases it requires more information regarding a family’s income and assets than the FASFA, and weighs these factors differently.
- Grandparents have greater flexibility. When a grandparent helps pay for college, even when the money is taken from a 529 plan, it’s counted as student income on the FAFSA. A student’s financial aid package can be reduced by as much as 50 percent of the income value reported. In previous years, grandparents who wanted to help pay for college would have to wait until their grandchild’s junior year, after the last FAFSA was filed, to avoid having to report anything. With the new rules, however, you must report “prior-prior” year income on the FAFSA, so students applying for aid for the 2017-18 school year would enter income from 2015. This offers grandparents greater flexibility in using 529 accounts to help pay for their grandchildren’s college, allowing them to provide financial support as early as the student’s sophomore year, after the second-to-last FAFSA is filed, without impacting financial aid eligibility.
- You won’t have to estimate when reporting income. Before the new rules, the FAFSA process began in January of the year the student would start college. As mentioned above, families had to report prior year income, which often had to be estimated since they hadn’t filed their tax returns yet. Students heading to college in 2017, however, are required to report 2015 income.
- Filing is that much easier. Using the preceding example, since 2015 tax returns would have already been filed, the data can be automatically transferred to the FAFSA with the IRS Data Retrieval Tool.