4 Ways the New FAFSA Rules Could Impact Your College-Bound Kid

4 Ways the New FAFSA Rules Could Impact Your College-Bound Kid

Applying for federal financial aid is so complicated that it can feel like a hazing of sorts.

But things are looking up for the college bound, thanks to new rules aiming to simplify the process and make it easier for families to prepare for the costs ahead.

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Traditionally, the Free Application for Federal Student Aid (FAFSA) couldn't be submitted until January 1 of the year for which the student was applying for aid.

But it had to include tax information from the previous year, so most families waited even longer—until after filing their taxes.

And because the FAFSA review process takes time, high schoolers have had to decide where to apply before knowing the amount of financial aid they'll be awarded.

Crazy, right? Well, that will change starting with applications for the 2017-2018 school year. Here's what you should know now.

1. You'll file the FASFA earlier.

Students planning to attend college in fall 2017 will be able to file the FAFSA as early as October 2016 (rather than January 2017). And October will continue to be the start date going forward.

2. You'll submit tax data from two years prior.

Rather than using prior-year tax data, you'll complete the FAFSA with prior-prior-year data. So students applying for 2017-2018 aid will use their parents' 2015 tax returns when they apply in October 2016.

3. You'll complete the forms more easily.

You'll be able to use the IRS Data Retrieval Tool to automatically populate FAFSA forms with your relevant tax data, which should save you some time and documentation hassle.

4. You'll get your financial aid package sooner.

Aid offers have typically arrived in March and April, and seniors need to make a college decision by May. Going forward, as students are able to apply earlier for aid, colleges will be able to notify them of their aid in a more timely manner, at least according to the National Association of Student Financial Aid Administrators. And that heads up will give families more time to plan their budgets.

The Takeaway: What This Means for 2015 ...

Now is the time for families with a high-school junior to strategize about how income, deductions and other line items on their 2015 returns may affect aid eligibility—and whether to make any changes before December 31.

To better understand which money moves will make sense for your situation in light of these FAFSA updates, consider consulting with an accountant or financial planner.

For instance, if your kid is a high-school sophomore, you may want to consider adjustments that shift more of your income into 2015, rather than 2016, when you will be applying for aid.

One thing that isn't changing? The need to have a financial game plan for college tuition. So if education costs are on your mind, read up on saving for college 101 and seven steps for broaching the topic with your kids.

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