USA/

(Reuters)

Student Aid Application Changes - New FAFSA Made Easier

College Planning

The Free Application for Federal Student Aid (FAFSA) is the fundamental gateway form for almost every type of financial aid, including government programs. Grants, loans, and work-study programs from the Federal Government provide $150 billion per year to college students across the nation. Yet there was a 2.8% decrease in FAFSA filings from the 2013-2014 academic year to the 2014-2015 academic year. Why would such a critical form decrease in usage, especially during these times of skyrocketing student costs?

Continue Reading Below

Part of the reason is misunderstanding of eligibility requirements. During the past academic year, an estimated 1.7 million students failed to apply for financial aid thinking that they were ineligible. FAFSA guidelines are available here to clear up any confusion about eligibility requirements.

The complexity and timing of the FAFSA form is another major reason that the form goes unused. FAFSA goes into incredible detail about finances, alienating people on both ends of the economic scale. If you are relatively wealthy, FAFSA can be as formidable as your tax forms — in fact, it requires a fair amount of tax information — and you will not be able to get similar FAFSA preparation help. For less financially savvy households, the eight-page FAFSA can be so intimidating that families either give up or fill out the form incorrectly.

Students are urged to fill out the FAFSA as early as possible, because some schools and states allocate FAFSA money on a first-come, first-served basis. FAFSA forms can be filed starting January 1st, but since FAFSA requires updated tax information to calculate your expected family contribution (EFC), parents are put in a difficult position. Most parents do not receive the necessary information to file taxes before February at best, and those waiting to file until April 15th risk being left out of FAFSA money.

Many parents choose to file FAFSA early using estimated data and then amend the filing in April with accurate tax data. Having to deal with a complicated form once is bad enough, and few parents appreciate a second trip down FAFSA lane per year for each child in college. In some cases, parents forget about updating the FAFSA information, causing even greater headaches.

The Obama administration recently announced plans to simplify the FAFSA filing process, if not the form itself. Beginning in the academic year 2017-2018, parents will be able to file FAFSA forms starting in October of the year prior, using the tax information from a year before that.

Continue Reading Below

For the last year of the standard FAFSA process, the academic year July 2016 to June 2017, the starting date for FAFSA filing is January 1, 2016 and the tax information is from 2015 (the information on the tax form that you file in 2016). By contrast, for the academic year July 2017 to June 2018, the starting date for FAFSA filing is October 1, 2016 and the tax information will still be from 2015 (the "prior-prior year"). That pattern continues in future years.

This change means that revisions are no longer necessary, since the tax information for the FAFSA will be based on completed tax forms and does not require estimates. However, this does mean that your financial aid calculations will be based on two-year old tax information. Parents who have suffered a job loss or other income loss should file a loss-of-income form to explain the situation.

It would be nice if the FAFSA form were simplified as well as the process. However, embattled parents of college students will take every bit of relief that they can get.

More from MoneyTips.com:
Applying for Federal Student Aid to Get Easier
U.S. Proposes Rules for College Prepaid Credit & Debit Cards
Financing Adult Education