Important Changes:  If you have a student in college or bound for college next year, the process for filing the FAFSA starts October 1st.  This is three months earlier than in the past. While this important process starts earlier, it is also easier.

The Free Application for Federal Student Aid (FAFSA) allows students to apply for federal aid in the form of grants, loans and work study programs. Completing the FAFSA is important, even if you believe your student will not be eligible for federal aid. This is because many states and colleges also rely on the FAFSA application when determining scholarships and grants.

Two FAFSA Changes: Simple but Important!

Two changes announced by the Department of Education in 2015 regarding the completion of the FAFSA take effect October 1, 2016.  The changes will give you more time to file as well as decrease the potential for mistakes in the financial data you must provide.

The first change involves when the FAFSA becomes available for filing. Under the new process, FAFSA can be filed as early as October 1st for the 2017-2018 academic year.  Previously, the application was not available until January. This gives parents an additional three months to submit necessary information.  However, the earlier FAFSA is submitted, the earlier you will know potential financial aid for which your student will qualify.

The second change greatly simplifies data collection. When completing FAFSA under the new rules, you will use income tax information from the last year for which taxes have been filed.  For example, when completing FAFSA in October 2016 for academic year 2017-18, you will use information from your 2015 tax return which is generally completed and filed with the IRS by April 2016.  Previously, tax information was required for the most recent tax year, even though the actual tax return for that year may not have been filed yet with the IRS.

Benefit of Changes

These simple but important changes solve two problems related to timing and accuracy of financial data. Some prospective students are accepted to college as early as December of their senior year in high school.  While this reduces the student’s anxiety, it may mean that the student could agree to attend a college or university prior to knowing the amount of federal aid he/she may be granted. With the FAFSA now available for completion in October of his/her senior year, this financial anxiety may be relieved as well.

The second problem the new changes solve is related to accuracy of income tax information. Because the information used to complete the FAFSA under new rules is from the last completed IRS tax return, more parents/students will be able to utilize the IRS Data Retrieval Tool that can be found on the FAFSA website. This link imports your completed IRS tax return information directly to your financial aid application, saving you time and removing potential for errors.

Impact of a Financial Windfall

What happens if your income is unusually high for the tax year used on FAFSA? Financial aid officers are able to use “professional judgement” to address special circumstances, such as a one-time inheritance or sale of an asset, to avoid artificially inflated income in a certain year. None the less, it may be important to plan any variable income appropriately, since the higher a family’s income, the lower the student’s potential financial aid.

For a first-year college student, it is important to recognize that the income tax year used for their first FAFSA filing will begin January of his/her sophomore year in high school.  Many consider the first financial aid application, or “base year”, to be most important.  Although you apply for aid separately each year, the awarded aid amount often does not vary much from the base year.


These key changes will allow prospective college students to apply for financial aid earlier, use more accurate tax information, and receive a response more quickly. All this will enable students and their families to better evaluate college acceptance offers and hopefully relieve some of the financial stress of the college admission process.

Contributions were made to this article by Ryan Jeffries, CFP, and Abby VanDerHeyden, CFP candidate, at Bedel Financial Consulting, Inc.

Elaine E. Bedel, CFP, is CEO and president of Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. She is a featured guest each Wednesday on the WTHR (NBC, Indianapolis) Channel 13 News at Noon, "Your Money" segment.  Elaine’s book, "Advice You Never Asked For…But Wished You Had," is available on For more information, visit or email Elaine at

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