Well, as if the financial aid process is not already confusing enough, the government has now changed the base tax year for which information is used when filing the FAFSA. Now this can be good news or bad news for you. The good news is that you will actually have the correct tax return completed when you are ready to file the FAFSA next year. The bad news is that if you have any financial adjustments to make that could actually lower how much you have to pay for college, you will need to take care of that a year sooner.
So let’s take a look in a little more detail. If your student is a senior this year, you will file the FAFSA in January, 2016 and you will estimate what your 2015 tax return will look like. Then you will have to scramble to get the 2015 tax return completed and submitted so your FAFSA can be updated. However, next year, when your current junior is a senior, you will file the FAFSA in October of 2015, and you will use your completed 2015 tax return to input the data. This will make filling out the FAFSA a bit easier and you should not have to update information once the FAFSA has been submitted. They call this PPY, or Prior-Prior-Year since you will be using the tax information two years prior to the student enrolling in college instead of one year as it is today.
So what is the downside? Well, there are different strategies some families can utilize that will reduce their Expected Family Contribution (EFC). That means that there are ways to reduce how much you may have to pay for college. Currently, families have until December of the student’s senior year to do this. With the new rules, these adjustments will need to be made by December of the junior year. Now the fact is that most families will not be negatively impacted by this change. However, there are some who will be.
So how can you figure out if this will impact you? You can start by estimating your EFC. A good calculator can be found on the College Board’s Big Future web site. Once you have figured out your EFC, you can play around with the numbers to see if changing certain things will change your EFC. Remember, the lower the EFC, the less the college will expect you to pay. It would probably be a good idea to get started on college planning a little sooner so you have time to make potential adjustments. The sophomore year is a good time to begin planning if financial aid is a concern to your family.
