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You’ve been saving for your child’s future college education in a 529 plan over the years. Now, it’s finally time to start preparing for them to head off to college in 2017. You’ve taken family trips to scout out campuses. You’ve researched where are the best post-secondary educational institutions for your child’s chosen career path. The next step: filling out the Free Application for Federal Student Aid (FAFSA).
FAFSA is the form you and your child must complete to apply for need-based federal financial support in attending four-year colleges and universities, community colleges, vocational schools, and graduate schools. This assistance can include grants, which don’t have to be repaid; federal low-interest loans, which will need to be repaid; and work-study programs. The financial aid is offered on first-come, first-serve basis; so the sooner your child submits a FAFSA, the better the chances are to receive federal monetary assistance. Remember, your CollegeAdvantage account can be used in conjunction with financial aid and scholarships.
At the end of 2015, the federal U.S. government made significant changes to FAFSA to simplify this process for students and their families. These permanent adjustments are in effect for the 2017-18 school year.
First, your child will be able to start the financial-aid application in October 2016, for the 2017-18 school year. The FAFSA form will be released three months earlier than previously distributed. Beforehand, the earliest a FAFSA could be completed was the first day of January of the year in which a student planned to start college. By moving forward the FAFSA start date, the timing of the financial-aid process is now more closely aligned with that of college applications. By submitting FAFSA earlier, college-bound students may receive speedier notification of what level of federal financial assistance they may receive. With this information, you and your child can better determine what school offers the best financial fit. As the 529 plan account owner, knowing the level of monetary assistance will allow you to better determine your child’s out-of-pocket expenses to attend the chosen eligible education institution, and how to best manage the accrued savings in your 529 account.
Additionally, states, universities, colleges, and private organizations will use FAFSA to determine what grants or loans to offer to eligible students interested in attending their school system. So you and your student may learn earlier if there will be any additional state and college financial assistance.
Second, for the 2017-18 school year, your child will be able to fill in FAFSA with your 2015 income tax return. The use of the income tax return from two years ago is known as “prior-prior year.” With the “prior-prior year” tax return, your child can complete the application with most up-to-date financial information. Previously, FAFSA was filled out with the tax return information from the prior year. For example, if your child filed a FAFSA for the 2016-2017 school year, it would have contained your 2015 tax return information. Typically, most families weren’t able to start their tax returns until well after the January release of FAFSA. This slowed down the financial assistance process. If the application was turned in later because of delayed tax return filings, then the chance of receiving federal financial aid could be lower. Now, with the use of the “prior-prior year” tax return, you can more readily fill in the FAFSA starting in October, and therefore, potentially increase the chance to receive financial assistance.
The ability to use the “prior-prior year” tax return on FAFSA also benefits universities and colleges because it can reduce the amount of time needed to verify asset information as the IRS already has it. Potentially, the schools can then more quickly determine and distribute their financial aid to students.
Third, with the use of “prior-prior year” tax return, your child can now take advantage of the IRS Data Retrieval Tool (DRT). DRT electronically imports accurate IRS information to the FAFSA form. This can reduce the amount of errors entered on the application as well as reduce your and your child’s time needed to complete the FAFSA. Again, the use of DRT will help colleges and universities to speed up their approval process as there will be less need to authenticate the financial information.
Even if you don’t think your child will qualify for any need-based financial aid, don’t neglect to fill out the FAFSA in October. You never know for what financial assistance your child might qualify to use in conjunction with your CollegeAdvantage account. If you wait until your child is accepted at a higher education institute before applying, you could miss out on some monetary support, because, as you now know, federal financial aid is offered on first-come, first-serve basis.
For more tips on how to file the FAFSA, visit here. For an estimate of how much financial aid you might receive before doing the FAFSA paperwork, start by providing the necessary information to this form. Or you can read this article from the U.S. Department of Education to learn more about the changes for the 2017-2018 FAFSA.
Now you know — collect your paperwork and get ready to fill out the FAFSA on Oct. 1!
Posted on September 21, 2016