Financial advisers should remind clients with children attending college or planning to start next fall that federal financial aid forms will be available starting Saturday, three months earlier than past years.
In addition to the date change, the new Free Application for Federal Student Aid will ask for household income and financial data from 2016 tax returns, which includes information related to 2015. The federal government and most schools use this FAFSA to determine how much families can afford to pay for college during the 2017-18 school year and how much can be offered in grants, loans and work-study programs.
Previously the decisions have been based on financials from the year prior to enrollment. But President Barack Obama took executive action last year to allow for reporting prior-prior year income data on the forms so families will have information about their potential aid packages sooner.
The goal is for families to know earlier how much they'll need to come up with to cover the year's college costs. The financial aid awarded in that first year is crucial for many families in the decision of where the student will go to college, even though college aid can change over the years the student attends.
“We're hopeful that receiving the information about student financial aid earlier will help families make better financial decisions and avoid unnecessary debt,” said Justin Draeger, president of the National Association of Student Financial Aid Administrators.
Student loan debt has ballooned in recent years, with about 40 million Americans owing a total of $1.3 trillion in student loans, according to a May Federal Reserve Bank of New York quarterly report on household debt. In comparison, about $1.1 trillion is owed in car loans and $712 billion is due on credit cards.
Most colleges base their financial aid decisions on the FAFSA data, and that form is the gateway to federal financial assistance that may be available. An additional form, the CSS Profile, is a separate online application for financial aid that is used by about 300 colleges, universities, scholarship programs and professional schools in their aid distribution. That's also available Oct. 1.
Trish Gildea, senior financial planner at Summit Financial, said all families should fill out the FAFSA.
“Affluent parents may be able to get some financial aid, particularly if they have more than one child in school,” she said.
Additionally, a completed FAFSA may be a prerequisite at some colleges for merit-based aid, she said.
The FAFSA application deadline is not until next June, but colleges, states and scholarships all have varying deadlines to apply for aid. Families should file these federal aid forms as soon after Oct. 1 as possible to be considered for as much aid as possible.