Upcoming FAFSA Changes

Each year students must submit a Free Application for Federal Student Aid (FAFSA) to determine eligibility for federal student aid. Federal student aid includes Federal Pell Grants, Federal student loans, and work-study opportunities. Currently, this application uses prior year (PY) income data to calculate a student’s financial need. Because of this, it is important that students fill out the FAFSA as early as possible once the application is released to be considered for all types of financial aid.

Unfortunately, a delay in completing the income tax return can cause an unfavorable chain reaction, even if the delay is unavoidable. The income tax return delay can result in a delay in submitting the FAFSA, which can result in a delay in financial aid notification- and possibly a reduced amount of financial aid. This occurs because some forms of financial aid have limited funds, which is distributed on a first come, first-served basis.

In order to minimize this time crunch and FAFSA completion pressure, two major changes to the FAFSA will take effect for the 2017-18 school year (July 1, 2017 through June 30, 2018). The first is that the FAFSA will use prior-prior year (PPY) income data to calculate a student’s financial need. Since prior-prior year income data is to be used, this allows for the second major change; the FAFSA to be available earlier. The FAFSA would be available starting October 1 of the previous year instead of January 1 of the upcoming school year.

PPY chart

Although this may sound confusing below you will find answers to some questions you may have regarding these two changes.

How will this change impact how the FAFSA is completed in the future?

President Obama issued an executive order to implement this change. It does not impact the 2015-2016 nor the 2016-2017 academic years. It is effective for the 2017-2018 academic year. So all students completing the FAFSA for 17-18 academic year will use the prior prior year income information which will be calendar year 2015 income information.

What is the advantage of this change?

This change will be a huge help to students and their families when applying for financial aid. Tax returns for calendar year 2015 will be submitted by April 15, of 2016. That means the FAFSA for the 2017-2018 year can be published and available for completion on-line much earlier. In fact the President’s executive order requires that it be ready for submission beginning October 1 of 2016. That means rather than completing the FAFSA after January 1 and perhaps even later because a student is waiting for tax returns to be completed, a student who is just starting a college search can apply for admission and financial aid at the same time. Knowing how much financial aid is available earlier can help students and their families make better enrollment decisions.

The other advantage of moving to a prior-prior year application is it makes using the IRS data retrieval process much easier. Currently, the data retrieval process can be unsuccessful due to the tax return not yet being filed or if filed it is still being “processed” by the IRS. With prior-prior year, that won’t be the case because the tax return for the prior prior year normally has been filed and there are no issues with accessing it via IRS data retrieval.

What type of award information will be available to a student who applies for financial aid in October of his/her senior year?

There are many unanswered questions still at this point regarding this question. Speaking generally, federal award amounts may not be available. However among lawmakers in Congress this change was generally well supported across all parties. So we are hopeful that there will be momentum for Congress to make some changes in the way it does business so prior-prior year will be the most effective. Within the University of Nebraska we are currently involved in discussions with senior leaders to determine how the University can provide better eligibility information earlier to students applying at our campuses. So stay tuned. But our goal at the University of Nebraska at Kearney is to provide specific award information much earlier.

How can income information that is two years old still be a good measure to determine a student’s eligibility for financial aid?

There has been an extensive effort by the National Association of Student Financial Aid Administrators in partnership with the Bill and Melinda Gates Foundation to study the viability of prior prior year data. This research has assured us that while income can change from one year to the next, those changes typically result in minimal change to student aid eligibility. As financial aid professionals we have an existing mechanism to address income changes when they would impact student aid eligibility. It has been used many times for our students here at UNK when the situation warranted it. That option will continue and we intend to continue to use it. It is important that families inform us about income changes so we can work with them to address concerns.

How can high school counselors prepare students and their parents for this change?

Keep in mind that this change doesn’t impact current seniors. They will still have access to the FAFSA for the 2016-2017 academic year beginning January 1, 2016 and will be using prior year (2015) tax information. However it may be appropriate to consider switching programs for juniors that would typically be scheduled in the fall to spring semester of 2016 to help them prepare for this change.

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If there are other questions you have that have not been answered, please email the Director of Financial Aid, Mary Sommers, at sommersm@unk.edu.