College Application Time is Here! So are Some FAFSA Changes to Know.

The deadline for regular decision college applications usually falls around January or February, with colleges making final decisions by May. One of the most important steps in the college application process is to apply for federal aid by filling out the Free Application for Federal Student Aid, or FAFSA. This aid includes federal student loans, federal work-study loans, grants, and scholarships.

The window to file the FAFSA is from October 1st through June 30th and must be filed for every year the student attends school. The U.S Department of Education uses the FAFSA to determine your eligibility to receive federal student aid. Many colleges use the FAFSA as part of their financial aid process and have limited amounts available, making aid on a first come, first serve basis. It is best to apply for it as soon as possible.

There are several ways to file for FAFSA.

**Changes to the FAFSA**

Required Tax Document Changes

For the 2020–21 FAFSA, filers will use their 2018 tax returns. This is referred to as prior-prior year (PPY) taxes. You are not permitted to use your 2019 tax information. This is good news since you most likely have filed your 2018 taxes by the time you file the FAFSA for the 2020-2021 academic year so you will be able to import your tax information into the FAFSA form right away using the IRS Data Retrieval Tool (DRT).

Before this change, the tax season and financial aid season overlapped. Even if you started the FAFSA early, you needed to wait until you completed the prior year’s tax return to file the FAFSA. Since many colleges give aid on a first-come, first serve basis, this uncomfortable timing caused stress due to some aid programs having deadlines as early as mid-February.

Note: If your 2018 income does not accurately reflect your current income (a reduction of income since the 2018 tax year), you can complete the FAFSA form as it is, and then contact each school the applicant is applying to in order to explain the change of income and provide the necessary documentation to prove so. Schools have the ability to review your individual situation and make adjustments to your FAFSA form as needed.

Tax Cuts and Jobs Act of 2017 Impact on FAFSA

One of the most significant changes to the FAFSA was triggered by the Tax Cuts and Jobs Act of 2017 (TCJA). The TCJA made changes to the 2018 taxpayer forms by eliminating the 1040A and 1040EZ forms and using only one form, the 1040. The Forms 1040A and 1040EZ were previously used to help determine aid eligibility on the FAFSA. Since they have been eliminated, the U.S. Department of Education created new questions on the FAFSA to reflect this.

  • Questions 35 and 83 (now 82) - “If the student or parent filed a 1040, were they eligible to file a 1040A or 1040EZ?” was revised. The new question is: “Will you file a Schedule 1 with your 2018 tax return?”.

There are now six new schedules incorporated into the main 1040 tax form. A tax schedule is the form the IRS requires you to prepare in addition to your tax return if you have certain types of income or deductions. The problem is, when the tax data is imported electronically to the FAFSA by using the IRS’ data retrieval tool, the system does not pull in the schedules, such as Schedule 1. Schedule 1 lists items like student loan interest paid, unemployment payments, and capital gains. Instead, there are prompts asking if you have filed that form.

The FAFSA does not give you an alert if any schedules are skipped, so it is possible you are not providing enough information and miss out on aid because certain deductions are not taken into account. This could impact the students’ expected family contribution (EFC), which is generated by the information provided on the FAFSA and is used to give an estimate of a family’s ability to pay for college.

New Mobile Effort to Streamline Process

The Department of Education developed a mobile FAFSA app in 2018 in an effort to streamline the process and make the form more easily accessible. There have been some modifications to features and some new features all together.

  • The fafsa.gov website has been been synchronized with the myStudentAid mobile app’s myFAFSA, allowing you to switch easily between the two and ensures that the user can continue where they left off in the process.

  • There are now reminders for whether you are logged in as either a parent of a student.

  • There is now a checklist and push notification.

A Decreased Asset Protection Allowance (APA)

The FAFSA shelters a portion of your assets using an asset protection allowance (APA) that is set annually by the U.S. Department of Education. The APA has dropped significantly since peaking in 2009-2010 and continues to decline. This means you could qualify for less financial aid next school year because more assets are now included in your income. The APA for a 65-year old parent has decreased from $84,000 in 2009-2010 to $9,400 in 2020-2021. This can cut the student’s eligibility for need-based financial aid.

Carol Chaudet

(Last Updated 1/8/2020)