Starting in the previous school year (2015), the US Department of Education initiated the rollout of a few significant changes to the Free Application for Federal Student Aid (FAFSA). FAFSA is often the first financial resource counselor suggest parents turn to for help in covering the costs of higher education for their children.
These changes are intended to improve the system. As such, there are things to both love and not so love. On the plus side, students can now apply earlier for federal grant money through FAFSA. Rather than waiting until January, students may apply now. Planning ahead has its benefits here as this is a first come first served system, based on demonstrated need and eligibility. Great news.
Also, parents will now be able to base their income eligibility on the tax year previous to the current year. This can be a significant benefit if for instance, their income was significantly lower that year. Obviously, not so great if that was a year of significantly greater income. The majority of families applying for aid, however, will benefit from this as household incomes hadn’t yet begun to rise.
Now, the not so great news. Asset protection has been drastically cut. What this means is that families will no longer be able to shelter savings and investment income as they had previously. Starting this year, the amount of protection is reduced by half and will continue to decline moving forward. This means that savings and investment income will now factor more heavily when assessing a student’s financial eligibility.
In order to offset this, families are encouraged to consult the FAFSA financial eligibility requirements and consult a professional in this context to determine what, if anything can be done to mitigate any impact.
Another potential up side: schools will lose a piece of data they’ve previously had the benefit of in weighing a student’s need. Schools could see what other institutions of higher learning they were in competition with for students. Students could apply to up to 10 schools through FAFSA and all schools could see what other schools were on a student’s list. Not any longer. This could be a benefit as many believe that schools used this data to glean what schools were more appealing and could therefore base their acceptance of FAFSA award accordingly. For instance, if a student put school a first on their list, school a may infer that the student would prefer to attend, regardless of whether they were awarded a grant. Since this data is now removed, school will have one less potentially arbitrary data point to consider, thereby leveling the playing field.
All told, while these changes may seem minor, they do add up to significant potential impacts for student who’d rely on FAFSA to cover a significant portion of their college costs.
Counselors can help by referring to the FAFSA site’s chart of changes and implementation dates. This information can be found here: https://studentaid.ed.gov/sa/about/announcements/fafsa-changes
Bottom line: earlier registration and the removal of preferential school ranking is a good thing and the total financial assets reported by families needs more thoughtful and thorough consideration now more than ever.