IT’S THAT TIME OF THE YEAR (AGAIN)
If you are a high school senior or college student, the New Year isn't just about making resolutions. It's a time to file or update your Free Application for Federal Student Aid FAFSA®. The FAFSA® form is used to calculate how much students and their families are expected to contribute to the cost of attending college and what sort of financial aid they may be eligible to receive. No single form is more important when it comes to applying for financial aid for college.
THE EARLY BIRD GETS THE WORM
The form for the 2016-17 school year is now available online at www.fafsa.ed.gov. Although the federal deadline isn’t until June 30, 2017, it’s best to submit the form as soon as possible. The earlier you get started, the better. Not only will you feel better that you have this important task checked off your to-do list, but you will be at the head of the line for many of the first-come, first-served state aid programs.
Filing the form early is not always ideal because it requires filers to use information from their federal income tax return from the calendar year that just ended. This means that January filers would use information from 2015, but most of us will not receive our W-2 forms and other information necessary to file a 2015 tax return until later in January (at the earliest).
IT WILL GET EASIER…
This is the last year filers will face this frustration because starting in 2016 new rules to FAFSA® will take hold. Beginning next year with the 2017–18 application, the FAFSA® will be available to students and families on October 1, 2016. This means that students who need to complete the 2017–18 FAFSA® will be able to access and submit the form anytime from Oct. 1, 2016, through June 30, 2018 using the same 2015 tax year financial information that they used for 2016-2017.
The following table provides a summary of key dates as we make this transition.
BE CAUTIOUS WHEN USING ESTIMATED TAX INFORMATION
In the meantime, families who want to file in early January 2016 before they have filed their 2015 income tax return can complete the FAFSA® form with estimated financial data. When estimating your income, try to be as accurate as possible. Use actual pay stubs from December. If your estimates are inaccurate, it will have a significant impact on your Expected Family Contribution (EFC). If there is a sizeable discrepancy, you may need to correct the financial information when the Student Aid Report (SAR) arrives.
When you are ready to input your actual tax figures, consider using the IRS Data Retrieval Tool to add income tax figures directly onto your FAFSA®.
WHAT YOU’LL NEED
The more organized you are, the easier you’ll find the FAFSA process to be. Here are some of the key pieces of information and documents you will need:
- Social Security number
- Driver’s license (if available)
- Parent and Child tax forms (don’t worry if they aren’t complete yet—you can use estimated numbers now and adjust them later if needed)
- Records of untaxed income, such as payments to tax-deferred savings plans, child support, veterans benefits, or workers’ compensation
- Current bank statements
- Information about any businesses you own, investment mortgage information, business and farm records, and other investment records
It is important to complete the form carefully because mistakes can delay the processing of your application. Most mistakes on the FAFSA can be avoided by carefully reading the instructions and questions.
In my next blog, I will address some of the most common errors involving FAFSA® and how to avoid them.
Greg joined HCM as a Wealth Advisor in 2009. He has 15 years of experience working in the investment industry. Greg obtained a Bachelor of Finance Degree from Xavier University and is a CERTIFIED FINANCIAL PLANNER™ professional. In 2015, Greg earned the Certified College Planning Specialist (CCPS®) certification. The CCPS® certification is the standard of excellence for college financial planning.
Content in this article is not intended to be financial advice. Instead, we think of it as educational, and financial education is important to us. Retirement and financial planning services at the Cincinnati firm Hengehold Capital Management.