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FAFSA changes you’ll welcome

FAFSA changes you’ll welcome
Have you ever struggled to complete and submit timely the Free Application for Federal Student Aid (FAFSA) for yourself or your college-bound child? If so, relief is at hand. Last year, the U.S. Department of Education announced changes to the FAFSA process intended to align the timing with college application cycles and provide more time to complete the forms with information more readily available.

While the FAFSA process currently opens on January 1 and closes June 30 for the school year beginning the following fall, the process will now open on October 1 of the year preceding the school year. So, beginning October 1, 2016, students and families can complete the application for the 2017-2018 school year. The FAFSA process will continue to close on June 30.

The second major change is that students can use income information from an earlier tax year to complete the FAFSA. Beginning with the FAFSA process opening this fall, students and their families can use 2015 income information instead of 2016 income. This will avoid a common practice of students completing the FAFSA with estimated income in an effort to meet state financial aid deadlines, which often fall in March.

Below is a chart provided by the Department of Education designed to help illustrate the changes.

FAFSA chart

You should be aware that the Department of Education made another change, one that is probably not as welcome: the “asset protection allowance” (APA) is now lower. The APA allows families to save without having that amount count against them in the determination of how much financial aid the student can receive. The lower the APA, the more income the family is deemed to have to spend on tuition and other expenses, and the less financial aid the student will likely receive. The APA for the 2016 – 2017 school year is published in the Federal Register.

Campus visits, college applications and anticipating a new season of life can be exciting and a little tense, but applying for financial aid has been downright stressful for some. With these new changes to the FAFSA process, students and their families should see some deadline-related relief as they determine how to fund higher education expenses.

FAFSA 2016 art

OTHER STORIES FOR YOU
BACK-TO-CAMPUS TAX PLANNING TIPS. As your college-aged children head back to campus, it’s a good time to think about some of the tax planning opportunities related to education expenses. There are plenty of tax incentives available to help lessen the burden of paying for college, and we want to make sure you are aware of them and can take advantage of any that apply to your situation.
TAX PLANNING FOR HIGH NET WORTH INDIVIDUALS: CHARITABLE GIVING. In our previous article on tax planning for high net worth individuals, we discussed strategies for reducing taxable income. One such strategy deserves special focus – charitable giving.
K-1 INSTRUCTIONS. Find K-1 instructions for S corporations, partnerships and fiduciaries here.

Posted 3-10-2016 | Topics: Client Alerts, Newsletters, Values,