On September 14, 2015, President Obama announced two important changes to the Free Application For Federal Student Aid (FAFSA) that could affect how much help you get paying for college and take a lot of the stress out of what just might be the most stressful time of your life. Thanks POTUS!
Here’s where we break it down for you:
1. What is the FAFSA?
The FAFSA is a form that must be filled out by every prospective college student seeking federal financial aid. The form allows the government to determine how much money the student qualifies for, based on these four criteria: student income, student assets, family income, and family assets. These components constitute the student’s EFC (or Expected Family Contribution).
2. How did it work before?
Before Obama’s big announcement, students would generally apply to college in the fall of their senior year, but not apply for financial aid until January—when the FAFSA comes out. This meant that many students would find out where they got in to school but not know whether they’d receive enough financial aid to actually go there. Talk about a nail biter!
3. Why was the system ‘broken?’
Under the old system, applying for financial aid was somewhat of a catch 22—the FAFSA didn’t come out until January because families needed the prior year’s tax return in order to complete the form. (And even then, many families ended up having to rush to file early—well before the April 25th deadline—just to find out if they qualified for aid.) Meanwhile, college applications were long since due and acceptance letters would even start to go out as families were just getting their FAFSAs together. This created a vicious cycle of cramming (something that should be left for your geology final, not your financial future).
4. Obama’s change: Part 1
Beginning in 2016, the FAFSA will be released earlier—in OCTOBER. This means students can fill it out at the same time they’re applying to college and, in the vast majority of cases, will find out their financial aid package BEFORE they have to make a decision about schools.
5. Obama’s change: Part 2
The reason the FAFSA can be filled out earlier is that a student’s aid package will now be determined by their family’s financial standing during their SOPHOMORE year in high school (the FAFSA used to be based on the student’s junior year). This means that you and your parents will have to start thinking about how your family’s financial decisions will affect your aid a year earlier than before.
6. Awesome bonus thing
There’s a new tool that allows you to log in to the IRS through the FAFSA and it will automatically pre-populate much of the information needed for the FAFSA. (This is made possible now because the required tax info comes from two years prior to when you’re actually filling out the form, and is therefore already completed.)
7. When does it take effect?
Obama’s FAFSA changes take effect in October of 2016, which means that current juniors (sorry seniors…) will be able to take advantage of the earlier and easier FAFSA next year. And current sophomores should start thinking about how their financial decisions THIS YEAR will affect their haul from good ol’ Uncle Sam.
BUT WHAT DOES IT MEAN FOR YOU?
1. SOPHOMORE STRATEGY
Since the FAFSA will now evaluate your family’s tax return from your SOPHOMORE year (one year earlier than before Obama’s changes), you should handle your finances strategically during this year. For example, if your family needs to make a big purchase, like a car, do it beginning in January of your sophomore year. Also, minimize capital gains, and maximize contributions to your parents’ retirement fund.
2. SEPTEMBER RUSH
Because the start of the college application season, scholarship application season, and financial aid season will all be simultaneous during the busy back-to-school time frame, you will need to manage your time more efficiently during a new September rush period.
3. DON’T DELAY TO PLAY
Although these new Obama rules won’t take effect until next year, as a savvy student, you can realize many similar benefits THIS YEAR by being proactive in the scholarship and financial aid process (using Scholaroo is a good start!).
4. SEEK OUT ‘PROFESSIONAL JUDGEMENT’
‘Professional Judgment’ refers to the authority of a school’s financial aid administrator to take a family’s special circumstances into consideration. For example, if someone in your family has high medical expenses or if you received one-time income like an inheritance (which inflates your perceived ability to pay but doesn’t happen every year), the financial aid administrator may be able to make adjustments to benefit you.
With Obama’s changes, since more time will have elapsed between the year your financial aid is determined and the year you start college, a lot more special circumstances can come into play. So it’s more important than ever to get a ‘Professional Judgment’ review.
The US Department of Education has also recently launched a site that helps you compare colleges’ financial information and find out about financial aid programs.