BREAKING NEWS: FAFSA Based on Prior-Prior Year Income
Good news coming out of Washington for future college students and their families: the financial aid application process just got a whole lot easier! On Sunday, September 13th, President Obama signed an executive order mandating the collection of what is referred to as prior-prior year income data on the FAFSA.
As many parents know, the FAFSA form becomes available for the coming school year on January 1st. In order to meet financial aid application deadlines, families must complete the FAFSA in January or February of their child’s senior year in high school, long before their tax returns are complete for the prior year, and must guesstimate that year’s tax data as best they can. Calculating these estimates is a burdensome process for students and parents, and often results in inaccurate financial aid awards that must be adjusted once taxes are finalized in April.
The new executive order simplifies the financial aid process. Beginning with the 2017-18 school year, the FAFSA form will become available in October instead of January, allowing colleges to provide financial aid offers earlier in the college application timeline. The application will ask for the family’s prior-prior year tax data, from tax returns that were finalized months earlier. No more guessing. No more confusion. No more uncertainty. Students graduating in 2017, who would previously have had to wait until January 2017 to apply for aid based upon estimates of the 2016 tax information, can now apply for financial aid as early as October 2016, providing only their 2015 tax information. Numbers will be final, easy to find, and accurate.
The benefits of the new process are numerous:
- Assuming colleges align their timelines with the earlier availability of the FAFSA, families will receive earlier financial aid offers, allowing them to make informed enrollment decisions and plan appropriately for future costs.
- The process will be less confusing. Parents won’t have to guess anymore—they will report numbers they already know.
- In fact, since prior-prior year tax returns will already be complete, parents will be able to just click a button on the FAFSA to import their income figures right from the IRS database—they don’t even have to answer the questions themselves!
- Financial aid offers will be accurate. Since offers will be based upon final tax figures imported from the IRS, there will be no need to correct numbers and adjust financial aid awards after enrollment decisions have been made.
The only drawback to the use of prior-prior year income data is that colleges will now be basing financial aid awards on information that is, essentially, out-of-date. When a family is applying for financial aid, they will be providing income data that is almost a year old, and by the time the student actually enrolls in college, almost another year has passed. A family’s income can change dramatically over this kind of timeframe, so applicants must be diligent about keeping the colleges informed of any changes in circumstance, such as a parent’s job loss. If your prior-prior year income is higher than your current or anticipated future income, you must take the initiative to ask the financial aid offices to consider your special circumstances. If you don’t, it will take an extra year before that drop in income is accounted for in a financial aid award.
So, while extra effort must now made by families who experience a large drop in income from their prior-prior year, the new executive order simplifies the financial aid process dramatically for the vast majority of applicants. The guesswork has been removed from the application, and, moving forward, completion of the FAFSA should be straightforward, award offers should be accurate, and the whole financial aid process should be, if not stress-free, at least less stressful for students and their parents.