For many, January 1 signifies the start of a new year, creating resolutions and spending time with family and friends finishing up the holiday leftovers. For those who currently attend college, or will be that fall, this date likely stands out for a different reason. On January 1, students and families can officially begin completing the Free Application for Federal Student Aid (FAFSA), which all colleges and universities require as part of the financial aid application process.
Currently, the FAFSA is completed using prior year tax figures. For example, a student who will be completing the FAFSA for the 2016-2017 academic year, will be asked to provide tax information for the 2015 tax year. For some families, this can be challenging, as the information being requested pertains to tax forms not due until April 2016. As a result, many families use prior year returns and most recent W2’s to estimate the information and are instructed to return to the FAFSA to update it once they have completed their returns. This process, however, is about to change.
Earlier this month, President Barack Obama announced a new initiative to simplify the way in which students apply for financial aid. Beginning with the 2017-2018 academic year, applicants will enter information from two years prior onto the FAFSA. The use of prior-prior year tax figures, commonly known as PPY in the financial aid world, is part of President Obama’s plan to make applying for and accessing financial aid easier for students. Asking families to report information from an already completed tax year will reduce the need to estimate their tax figures. A larger number of applicants will also be able to take advantage of the IRS Data Retrieval Tool, which populates their tax information from the IRS directly onto the FAFSA, easing the overall process.
In addition to using figures from an earlier tax year, the FAFSA will also become available three months prior each year, in October, rather than January. This allows families to begin the financial aid application process sooner and potentially have additional time to review their financial aid awards, submit additional materials and consider all available options.
Here is a quick breakdown,
If you want to learn more about how this initiative benefits students, check out this video from the National Association of Student Financial Aid Administrators (NASFAA), http://www.nasfaa.org/ppystudents.
Remember, this is effective beginning with the 2017-2018 FAFSA. When completing your 2016-2017 FAFSA, which becomes available January 1, 2016, be sure to use 2015 tax figures!