Qualifying for Federal financial aid requires filling out and submitting the Free Application for Federal Student Aid (FAFSA), based on your income from the preceding year. Except historically, this FAFSA process has been challenging, because schools are already issuing acceptance letters about attendance before most families have even finished filing their tax return to know what income to report on the FAFSA!
To make the process easier, this week President Obama signed an executive order that will change the FAFSA rules beginning with the 2017-2018 school year, allowing students to complete the FAFSA based on the “prior-prior year” (PPY) income, and shifting the entire application process back to October of the preceding year (a full 11 months before the student will matriculate!).
The new rules should make it much easier for students to file the FAFSA to determine eligibility for financial aid (especially since it will now be feasible to use the IRS’ automated Data Retrieval Tool). But notably, it means that the current 2015 tax year will now count twice for financial aid purposes (2016-2017 under the current prior-year rules, and again in 2017-2018 under the new PPY rules!). And in the future, the new prior-prior year rules mean the “key” years of income for college financial aid now start as early as the student’s rising sophomore year of high school… but notable end mid-way through the student’s sophomore year of college!