If you have a college-age child in the house, this will be your reminder that now is not just “tax season”, it’s also “FAFSA season.”
The two are very much related.
Everyone knows what tax season is about – pay the IRS! – but the FAFSA season can have an equally momentous impact on your finances. FAFSA is the government acronym for Free Application For Federal Student Aid. Fill it out and you gain access to the $150 billion a year in financial aid that the federal government offers college students.
The money comes in the form of grants, loans and work-study programs, but only to those who apply. And there’s the real rub between these two relatives: You need information from your federal taxes to complete the FAFSA, but the deadlines for the two are upside down.
Filing for FAFSA opens on January 1. Taxes aren’t due until April 15. Logic says to file your taxes, then use the information to complete the FAFSA, but logic and government seldom intersect and certainly don’t in this case.
While you can file an “estimated” FAFSA application, then go back and amend it after filing federal taxes, that creates another set of problems. State deadlines enter into the matter. Nineteen states want your FAFSA form completed by March 1, or earlier. Another five states want it in by April 1.
“Having all these deadlines certainly causes a lot of confusion,” Mark Kantrowitz, a nationally-recognized expert on student financial aid, told Debt.org.
Kantrowitz, senior vice president and publisher of Edvisors.com, has been writing and researching this chaos of deadlines since the mid-1990s. Kranowitz authored a best-selling book called “Filing the FAFSA” and says confusion over deadlines is one of several problems with FAFSA.
“My advice is to file FAFSA early,” Kantrowitz said. “Don’t wait until you’ve filed your taxes or been admitted to a school. FAFSA is used by state governments, colleges, universities and the federal government to determine how much financial aid you’ll get so file early and beat all the deadlines.”
What is it worth to get the FAFSA form in early?
Kantrowitz said that families who beat the March 1 deadline, receive on average more than twice as much in grant money (funds that don’t have to be paid back) as those who file after that deadline. Part of the reason for that is because nine states give out grant money on a first-come, first-served basis. Students who might qualify, but were late filing, miss out.
So do the students whose families don’t bother filling out a FAFSA application. The Department of Education estimates that almost two million students who would have qualified for grant money didn’t bother filling out a FAFSA form last year. More than one million of them would have received the maximum Pell Grant money available, or about $5,400.
Some people blame the onerous form itself. The 108 questions range from simple (name, address, birthdate, etc.) to more complex matters (taxable income, wages, pensions, capital gains etc.) that require good bookkeeping at home.
The process got a little easier in 2014 when the IRS introduced a “Data Retrieving Tool” that allows you to transfer information from your tax return directly to your FAFSA application. The hitch here, of course, is that you have to file your taxes before you can use the IRS tool to help with the FAFSA form.
Still, the length and complexity of the 108-question form prompted U.S. Senators, Lamar Alexander (R-Tenn.) and Michael Bennett (D-Colo.) to introduce legislation to knock 106 questions out of the FAFSA application. The Senators say that all the DOE needs to know to determine eligibility for a grant or loan is: What is your family size? And what is your family income?
“If our legislation becomes law, then families, guidance counselors and admissions officers would save millions of hours,” Sen. Alexander said in a speech on the Senate floor Feb. 25.
Kantrowitz supports attempts to make the FAFSA application easier. He has promoted the idea of using the previous year’s taxes instead of current taxes as the financial record for FAFSA. Research shows that it would make very little difference in the final eligibility of students seeking financial aid. The National Association of Student Financial Aid Administrators endorsed the idea, too.
“So maybe the tide is turning on adoption of this idea,” Kantrowitz said.Until then, just remember that when you file your taxes, file your FAFSA form right behind it.