The FAFSA Start Date is Now October 1
Students are now able to start filing the Free Application for Federal Student Aid (FAFSA) three months earlier, on October 1 instead of January 1. This change was made possible by basing the FAFSA on two-year-old federal income-tax returns, instead of one-year-old federal income-tax returns, starting with the 2017-2018 academic year.
Previously, the FAFSA was based on prior-year (PY) income and tax information. For example, the 2016-2017 FAFSA was based on 2015 federal income tax returns. But, since 2015 federal income tax returns were filed at the same time as the 2016-2017 FAFSA, it lead to complicated advice to file federal income-tax returns earlier and to not wait to file the FAFSA. But, you couldn’t file the FAFSA before January 1, since it was based on the previous year’s income and taxes.
With the switch to prior-prior year (PPY) income and tax information, the 2017-2018 FAFSA will be based on 2015 federal income tax returns. Most taxpayers will have already filed their 2015 federal income tax returns by the time they need to file the 2017-2018 FAFSA. Even taxpayers who apply for an automatic 6-month extension on their federal income tax returns will have filed their federal income tax returns by October 15. The switch to prior-prior year also aligns the financial aid application process with the college admissions timeline.
This switch to earlier federal income tax returns will allow more families to use the IRS Data Retrieval Tool to transfer information from their federal income tax returns into the FAFSA, simplifying the form.
Data elements that are transferred unmodified from the IRS into the FAFSA are not subject to verification. By enabling more students to use the IRS Data Retrieval Tool, the switch to prior-prior year will significantly reduce the number of FAFSAs selected for verification. This will save students and parents a lot of time and hassle.
The earlier start date may allow colleges to send out financial aid award letters and notifications earlier, giving students more time to choose a college before the May 1 decision day.
Some parents may wonder if they can substitute prior-year income for prior-prior year income, if it is lower. For example, if 2016 income is lower than 2015 income, can they submit 2016 income on the 2017-2018 FAFSA instead of 2015 income? The short answer is no. The FAFSA uses 2015 income as a proxy for income during the academic year. What matters is whether 2017 income will be lower, not whether 2016 income is lower. However, a significant drop in income in 2016 as compared with 2015 may be a sign that the family income will be lower in 2017 as well. It can also be a sign that the family’s income varies a lot from one year to the next. If so, the family should appeal to the college financial aid office for a professional judgment review. The financial aid administrator will review the family’s financial situation and decide whether to substitute an estimate of income during the award year for the prior-prior year income. The financial aid administrator could also decide to substitute an average of income during the last 3-5 years.
Here are a few important recommendations for students and parents:
- File the FAFSA every year, even if you got nothing other than loans last year. You can’t get aid if you don’t apply. Small changes in your family’s financial situation can lead to big changes in eligibility for need-based aid. For example, the amount and types of financial aid can change significantly based on changes in the number of children in college at the same time, changes in student income and assets, and changes in parent income and assets.
- File the FAFSA as soon as possible on or after the October 1 start date. Students who file the FAFSA sooner tend to get more grants, on average, than students who file the FAFSA later.
- Use the IRS Data Retrieval Tool to transfer income and tax information from your federal income tax returns into the FAFSA. This will reduce the likelihood that your FAFSA is selected for verification.