The White House this weekend announced plans to allow families to use older tax information to file for federal financial aid. The change will make it possible for students to find out how much aid they qualify for months earlier than they can now.
Currently, the Free Application for Federal Student Aid (FAFSA) isn’t available until Jan. 1. Aid eligibility comes late in the admissions process, long after students have selected colleges to apply to. In fact, the exact cost of college often remains a mystery until a few weeks before a student has to make an enrollment decision.
Families are urged to fill out the FAFSA, which is also often used to determine state and institutional aid eligibility, as a soon as possible. It’s usually a rushed process, and 4 million families apply for aid before they’ve filed their taxes, Education Secretary Arne Duncan said in a call with reporters Monday. For fall 2016, for example, families can start filling out the FASFA in January 2016, using tax information from 2015.
Under the new timeline, families would be able to use tax information from two years prior, and FAFSA forms would be available Oct. 1. As a result, more families could use the IRS Data Retrieval Tool to automatically fill in income information on the FAFSA, making the entire process easier and faster.
Families will no longer have to estimate their income and correct it later or delay filling out the FAFSA until they have their tax information, said Cecilia Muñoz, White House Domestic Policy Council director.
The change will go into effect for the 2017-18 school year.
College access advocates have pushed for the change, known among higher education professionals as using “prior-prior year” tax information, for several years. But it really picked up steam—and bipartisan support—in the past two years.
Education department officials had previously said they supported the idea but had concerns about the cost. Yet on Monday, Duncan said the department expects the cost to be minimal, about 1% of the total annual Pell Grant expenditures. In 2013-14, the government spent $31.5 billion on the Pell program, which provides grants to low-income students.
Susan Dynarski, a professor of public policy, economics, and education at the University of Michigan, says that using older tax information won’t significantly change how much the federal government awards in financial aid, because low-income families’ earnings generally don’t change much from year to year.
In researching FAFSA simplification, she found that the total amount spent on Pell Grants would have increased from $20.03 billion to $20.32 billion had the use of older tax information been allowed in 2012-13.
And she doesn’t see that increase a negative, since it improves access for lower-income families. (Duncan, too, said he wouldn’t consider it a bad thing if the cost exceeds the 1% estimate officials have now.)
Jon Boeckenstedt, associate vice president of enrollment management and marketing at DePaul University in Illinois, thinks the earlier timeline is a benefit for students and colleges, but he also expects it will have an unpredictable ripple effect on the entire admissions process.
Boeckenstedt predicts colleges overall will see a drop in applications because students won’t need to shop around as much for the best deal, since they’ll know at the start of the application process whether they can afford a college.
Some schools may see their applicants and admitted students increase, while others may see both numbers drop, he said. “It’s going to wreak some havoc about how we do business in the profession, which isn’t exactly a bad thing,” he added.
Many colleges, including the nearly 240,000-student University of California system, have already announced that they’ll move up their aid calendars as a result of the new rules. The nonprofit organization Scholarship America will encourage thousands of private scholarship providers to align their deadlines with the new FAFSA application cycle, according to a news release from the White House.
The Sunday announcement of a new FAFSA timeline capped a busy weekend of higher education announcements from the Obama administration. On Saturday, the Education Department released a new consumer tool and included a mountain of never-before-released data on graduation rates, loan repayment rates and alumni earnings.
For advice on maximizing your financial aid, check out MONEY’s College Planner, which includes a Find Your Fit tool to help search for colleges based on the factors that are most important to you.
