FASFA has been a sore spot, but changes have come to the federal student aid program
The Free Application for Federal Student Aid is changing significantly this year. The FAFSA is the government’s process for doling out federal funds to help students obtain a college degree, both at the undergraduate and graduate levels. This financial aid can take the form of money that must be paid back (like student loans) or money that does not need to be returned (like grants).
Crucially, many colleges also use the data found on the FAFSA form to award institutional aid and scholarships. That being said, many families fill it out even if they do not receive much from Uncle Sam.
Alas, the FAFSA has been a sore spot for many families over the years. It’s a complicated form that causes a lot of anxiety. To fill out the form, families must report income and asset information for both parents and the student. Some information is two years old and retrieved from the tax return, while other information is reported “as of today” (i.e., checking account balances).
There are complex and sensitive questions regarding investments, citizenship status and untaxed income. One year, the FAFSA became even more challenging to complete when a data import tool from the IRS was hacked and taken offline. For many families, it feels about as fun and easy as trying to file taxes.
To make things worse, helpful information on how to fill out the FAFSA is sparse. Families are desperate for correct guidance, as they know how important it is to get it right. When parents finally find trustworthy information, they come in droves. To give perspective, the FAFSA workshops I hold every year at local libraries regularly pull audiences of more than 100 people.
Luckily, Congress took notice and attempted to simplify the process. The FAFSA Simplification Act directed the Department of Education to drastically simplify the form and make changes to the underlying calculations. Unfortunately, the roll-out has been rough. Implementation has been delayed and the changes pushed the typical FAFSA opening date back from Oct. 1 to late in December last year.
A majority of those who dutifully logged in to fill out the form were queued into a waiting line web-page before being allowed in. The hope is that these issues will be ironed out as capacity increases.
Despite all the hiccups, the law ultimately had its intended effect. The FAFSA is now much easier to complete. The number of questions has been slashed, importing tax information has become a breeze and parents now have more control over the form to help their students fill it out. Useful tips, videos and general guidance are sprinkled in throughout the application.
In addition to form simplification, the new FAFSA also changed the underlying calculations used to distribute federal financial aid. Some of the new FAFSA’s changes are advantageous to families sending a child off to college. For example, more students will have access to Pell Grants, and the reporting of education savings accounts is better aligned with the student who will use it.
Other changes are disadvantageous and will penalize families. For instance, families no longer receive a benefit when multiple students are in college at the same time. It’s also worth noting that owners of small businesses and investment farms now must report these regardless of employee count.
Are you ready to get started with the FAFSA? If so, the documents and information needed to start haven’t changed. You will need your social security number, tax return information (from two years prior, so the 2024-25 FAFSA uses 2022 information), bank login information, investment records and an FSA ID.
The FSA ID is your login credential to enter and sign the FAFSA. Store this credential in a safe place as it will be needed to log back in, fill out the FAFSA in future years and manage student loans into the future. If you don’t have an FSA ID, you can sign up for one at the beginning of the FAFSA form. Additionally, you can access the new FAFSA form here.. Remember, the FAFSA is free to complete, so someone asking for your credit card information means you’re on the wrong website.
Jason Anderson is a member of the Financial Planning Association of Greater Kansas City. He is also the owner of Gradmetrics, a college and student loan planning firm. He is a Certified Public Accountant (CPA) in the Kansas and a CERTIFIED FINANCIAL PLANNER professional.
