Pay attention to changes in applying for student aid

The Savage Truth

There's a big change coming in the Free Application for Federal Student Aid, and those changes start Oct. 1.

Under rules enacted in 2015, the date for submission this year is earlier than in past years — and if you delay you might miss out on a lot of money.

If you're the parent of a high school senior (or a student already in college seeking aid for next year), here are the FAFSA changes to be aware of, along with some tips for getting the most financial aid for college:

FAFSA forms for the 2017-18 academic year can be filed starting Oct. 1. In past years the application start date was Jan. 1. The online application is available for free at www.FAFSA.gov.

Families that file online will receive their Student Aid Report and Expected Family Contribution within a week of completed filing (as opposed to two to four weeks for those filing by mail). Having that information early, in the midst of the application period, will help students and families make smarter choices about college affordability.

You must use your 2015 tax return for the application. In the past, when the application process started in January, families were required to guestimate their income for the year that had just ended. The new process uses income figures from the parents' tax return filed the previous April (e.g., the 2015 return for aid in the 2017-18 school year), and that information will be automatically imported into the FAFSA using a special IRS data retrieval tool.

Financial aid is typically awarded on a first come, first served basis. Most financial aid, including federal, state and private scholarships, is meted out in order of application. Some state and other aid programs have moved up their application timelines in light of the earlier FAFSA filing date. So if you wait until January to think about FAFSA, you might miss out on available money. Procrastination will cost you.

Get a FAFSA ID number now. Even though you can't start filling out the application until October, you can go online to www.FAFSA.gov and get your user-created ID and password for accessing the form securely. That will make it easier to get going.

List desired schools on FAFSA. Even though you haven't decided on all the schools to which you will apply, it pays to list your top choices. Many states award financial aid based on your in-state school preferences. Note: Other schools won't see your list, but state aid-granting agencies will.

The new, earlier filing date is bound to bring some confusion. Your family situation and income may have changed drastically since your tax return for 2015 was filed last April. If so, you should contact the schools to which you are applying and inform them that the EFC may no longer be accurate and that you may need a larger aid package.

And if you're “adjusting” income to qualify for more financial aid, you'll have to start planning earlier because of the new filing date.

File FAFSA even if you don't think you'll qualify for federal aid. It's used in some scholarship programs. Rick Castellano of Sallie Mae (the largest originator of private student loans, at more than $4 billion a year) notes that about 2 million students who would have qualified for Federal Pell Grants — free money that doesn't have to be repaid — didn't get the grants because they didn't file FAFSA.

You can access Sallie Mae's Beginner's Guide to FAFSA at https://www.salliemae.com/plan-for-college/financial-aid/fafsa/. And if you don't get enough federal aid, Sallie Mae’s private Smart Option loans have variable rates that start as low as 2.5 percent and are typically priced on the credit status of a co-signer.

Start now to make the most of the aid that is available. The early bird gets the worm. And that's the Savage Truth.

Terry Savage is a registered investment adviser and the author of four best-selling books. She responds to questions on her blog at TerrySavage.com.

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