What’s new with the FAFSA: current and future changes
Not everyone knows it, but most college students qualify for financial aid, such as federal loans and work-study programs. In order to determine your eligibility for federal student aid, you must submit the FAFSA (Free Application for Federal Student Aid) before every academic year. Even if you’ve submitted the FAFSA before, the application and formulas for determining aid are subject to change from year to year. Here are some recent and future changes to be aware of when filing your FAFSA.
Earlier FAFSA filing date and tax year change
Every year, there tends to be confusion about which year’s tax information to use when filling out the FAFSA. Luckily, starting this year things should be much easier. The 2017-18 FAFSA will be available on Oct. 1, 2016, and you’ll use the tax data from 2015.
How it used to work:
For the 2016-17 academic year (and prior), the FAFSA opened on Jan. 1, 2016. This application used tax information from 2015, which you likely wouldn’t have received until February or March 2016. Therefore it used to be necessary to return to your FAFSA application to update estimated tax data with final data.
How it works now:
For the 2017-18 academic year (and beyond), the FAFSA opens on Oct. 1, 2016. Tax information from 2015 will be used, which will already be available, so updating your tax information shouldn’t be necessary.
Asset protection allowance is decreasing
Asset protection allowance (APA) is a feature that protects a limited amount of you and your parent’s assets (savings, checking, and investments) from being assessed by the government when calculating your Expected Family Contribution (EFC), which determines the amount of federal student aid you’re eligible for. This protected amount changes based on the age of the oldest parent, marital status, and other factors. The asset protection allowance peaked during the 2009-10 FAFSA filing period, which was great for students whose parents had more assets. However, the APA has since seen a steady decline, with some projections claiming it may disappear entirely by 2018-19.
But why is it decreasing? The APA is reevaluated every year by looking at the gap between current average moderate family income and current average Social Security retirement benefits. In short, average Social Security retirement benefits are increasing faster than the increase in moderate family income, resulting in a smaller asset protection allowance. So, what does this mean for you?
If you’re a student from a middle to upper-class household applying for federal student aid, your chances of receiving money from need-based programs may decrease significantly. The good news is that income still plays a bigger role than assets in the overall calculation process. So if you’re an applicant who saves a lot on a moderate income, you may still qualify for a higher amount of financial aid.
If you’re a student from a lower to middle-class household and your parents don’t have sizeable assets, you may not be greatly affected. Less income, in addition to fewer assets, will yield the highest amount of financial aid.
“FAFSA position” becomes private
The FAFSA allows you to select up to 10 different schools with which to share your financial information. Previously, the schools included on your FAFSA were allowed to view all of the schools you listed, thus revealing what’s commonly known as the “FAFSA position.” This stirred concerns of universities using this information to influence admissions decisions and financial aid awards. Effective this year, in order to prevent any possible influence, the school list will no longer be shared with universities.
What’s happening with the Perkins Loan Program?
The Perkins Loan, used by more than 500,000 students, has a low interest rate of 5 percent, and gives students nine months after graduation to begin repaying the loan — longer than most federal student loans. This student loan is intended to help undergraduate, graduate, and professional students who demonstrate exceptional financial need.
The authority to use certain government funds to fuel the Perkins Loan expired on Sept. 30, 2015. This program was set to end, but in December 2015 President Obama signed legislation to extend the program for two more years. Students who demonstrate need-based eligibility can now receive a Perkins Loan through September 2017. However, there are some caveats to extending this program.
- After September 2017, no new Perkins Loans will be granted, even if you’re an existing borrower.
- Graduate students are only eligible to receive new Perkins Loans through September 2016 if they already have an existing Perkins Loan.
- New Perkins Loans can only be made to undergraduate students who have unmet need after exhausting all subsidized and unsubsidized Direct Loans first (otherwise known as Stafford Loans or Direct Stafford Loans).
Staying up-to-date on current and future FAFSA changes is important. Never assume that next year’s FAFSA will be the same as last year’s, and be sure to check for FAFSA updates and new federal student aid policies annually.