Eye on Investments
By Lane D. Talbert
If you have a child in college, you’re probably familiar with the Free Application for Federal Student Aid (FAFSA), which must be completed to help ensure that students don’t miss out on federal and state grants, work-study jobs, and loans. But you might not know that some important changes will be coming to the FAFSA during 2016 -- and these changes can affect both the process of filing for aid, and, possibly, the amount of aid your child will receive.
Here are three key changes to watch for:
•Earlier availability of the FAFSA -- Currently, you need to complete the FAFSA as soon as possible after Jan. 1 -- which means you’re probably filling out the form even before you’ve filed your taxes, which aren’t due until April. As a result, you may have to estimate your income and update the information later. However, beginning with the 2017-18 school year, you can complete the FAFSA starting on Oct. 1 of the previous calendar year, rather than wait until January. At that point, you will already have filed your 2015 taxes, so in filling out the FAFSA, you won’t have to rely on estimates of your income.
For 2016 only, this change presents something of an anomaly -- specifically, you should fill out the FAFSA as soon as possible for the 2016-17 school year, using an estimate of your 2015 income, and then complete the FAFSA again in October for the 2017-18 school year, using your actual 2015 income. In future years, you’ll only have to complete the FAFSA once, with applications accepted beginning each Oct. 1.
•Lower “asset protection” allowance -- When you report your financial information on the FAFSA, some of your assets -- such as your IRA and 401(k) -- are not counted toward the resources you’re expected to contribute to your child’s education. Some other assets are considered available, but a percentage of these assets can be sheltered, with the exact amount depending largely on your age and marital status. For the 2016-17 school year, this sheltered asset amount has been reduced significantly. However, while this reduction could have some effect on your student’s aid package, it shouldn’t be too severe because income, more than assets, is a bigger factor in the federal financial aid formula.
•No more shared mailing list -- When filing the FAFSA, students can choose up to 10 colleges to receive their financial information. Previously, when students sent their FAFSAs to multiple colleges and universities, these schools could see the other institutions on the mailing list. But starting with the 2016-17 application, schools will no longer have this information. This could actually benefit your child. Previously, if a school saw it was listed first on the FAFSA, it might have assumed it was the student’s first choice and, as a result, may not have felt the need to be flexible in awarding financial aid. Now, though, without a list of its competitors, a school might be more open to negotiating a more favorable aid package for your child.
It’s a good idea to stay current on the changes connected to the FAFSA because it helps determine financial aid eligibility -- and financial aid is a key component of your strategy to pay for your child’s (or grandchild’s) education.
This article is provided by Lane D. Talbert, financial advisor with Edward Jones Investments in La Vernia.