NAICU Washington Update

Department of Education Announces Switch to Use of Earlier Year Income Information

September 17, 2015

Jumping ahead of any action in Congress, the President announced on September 14, that the federal government will use “prior, prior” year income data to determine federal financial aid eligibility. Starting with the 2017-18 school year, the change means that students and families will know what their potential federal student aid will be earlier in the college choice process. The benefit to colleges is that those institutions will have less financial information to verify.

Currently, the Free Application for Federal Student Aid (FAFSA) is available in January for the Academic Year that begins the following July. Since tax returns are typically filed in the months after the FAFSA is available, current financial information is not always available when the student fills it out. Thus, colleges may make awards based on estimated information, and then must update applications when the exact information is available, later in the spring. In addition, the use of prior, prior year data will allow students to file the FAFSA much earlier. For the 2017-18 academic year, the FAFSA will be available in October 2016, rather than January 2017. The prior, prior year financial data can be downloaded from the IRS using the data retrieval tool.

In addition to the prior-prior year change, the Department is also asking Congress to eliminate 30 questions from FAFSA it says are irrelevant. This is being sought to further simplify the aid application process by removing questions about savings, investments, and net worth, and eliminating, questions related to untaxed income, and exclusions from income that are not reported to the IRS.

It is predicted that the use of prior, prior year data will increase the costs of the student aid programs. It is believed that more students will complete the form and that the aid awards will likely be greater since they will be based on earlier, and likely lower, earnings.

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