The College Game

By Dr. Mark L. Fisher | drmarkfisher@bellsouth.net

For high school juniors and those who are younger, applying for financial aid will change in a big way next fall. While this year’s seniors operate under the old system, the change will affect them when they apply for financial aid in their sophomore year in college. Thus, every college-bound student must learn the new system.

Next year, high school seniors will be able to submit the Free Application for Federal Student Aid beginning Oct. 1 for the July 1, 2017-June 30, 2018 academic season. That means their family tax year or base year will be the 2015 tax return. Another way of saying it is that the FAFSA will use tax information from the last year all taxes have been filed, called the “prior-prior” year, not the current year.

Let’s review. This year’s seniors who desire financial aid can fill out the FAFSA after Jan. 1. The family may use the 2015 tax return or give a pretty good estimate of the figures that will go into the 2015 return.

Families often panic because their tax returns are not completed before a college deadline for the FAFSA. How many people complete their tax return in early January? At the same time, college financial aid officers have their own tax season, trying to determine how much aid a student may receive and letting the student know soon enough to make an enrollment decision.

The federal administration has come to the rescue. The new date, Oct. 1, will come to fruition in 2016. And the income information will not be the base year of 2016 but will be this year, 2015. Therefore, present seniors will use 2015 for this year’s FAFSA and next year’s FAFSA. When current high school sophomores complete the FAFSA, the base year will be 2016.

What are the benefits of this drastic change? You will be able to complete the FAFSA earlier using tax information already submitted to the IRS. So there is no more guessing, then correcting the FAFSA because you were way off on your facts. And more filers will be able to use the IRS Data Retrieval Tool (DRT) to import verified tax returns to the FAFSA.

Colleges will receive the FAFSA forms earlier and know your financial need sooner. You will know your expected financial contribution (EFC) earlier. Also, colleges will be in a better position to let you know how much financial aid you will be given. Thus, when you are accepted to colleges, you will be better able to review their financial award letters.

Some families feel that they will not qualify for any need-based aid, such as Pell grants. Don’t think that way because that is only one source of aid. Colleges use the FAFSA to distribute their own aid, and states, career schools and private organizations may use the FAFSA to determine eligibility for nonfederal aid.

Approximately 20 million students receive some aid each year. In Georgia, the HOPE scholarship requires the FAFSA or its own form. By completing only the HOPE simple form, you are saying you want HOPE, assuming you are eligible, but not any other aid based on need.

Complete the FAFSA.

Parents are already asking questions about their 2015 tax returns, which will be used by current seniors and juniors. I am not a tax adviser and will not give advice beyond my professional expertise.

One thing for sure is that your 2015 tax information is doubly important because it will count twice for current seniors. Taking steps to reduce income before the end of 2015 may lower your EFC and bring eligibility for an improved aid package.

What should you do to decrease your income? Talk to those in the financial community. But know that the financial aid formula excludes assets held in retirement accounts, the cash value of life insurance policies, and the value of your home and other personal property. Also, a substantial savings account in a student’s name will not be helpful in the financial aid formula.

Mark L. Fisher is a college and career consultant at Fisher Educational Consultants (www.fishereductionalconsultants.com) and a consultant for the College Planning Institute (www.GotoCPI.com).