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The Free Application for Federal Student Aid (aka FAFSA) opens Oct. 1, 2021 for the 2022-2023 school year. And in a year where change feels near constant, the FAFSA application has undergone a few tweaks as well.
Select spoke with Kalman Chany, the president and founder of Campus Consultants, a firm that guides families through the financial aid process, for a breakdown of why families should pay extra close attention to this year's application.
While questions on the application aren't changing for the '22-'23 school year, how answers are interpreted is going to be a bit different, says Chany.
There are two questions on the application that have traditionally been "disqualifiers" for financial aid: a question about drug convictions and a question about registering with the Selective Service.
In the past, students who received a drug conviction while they were also receiving financial aid have been disqualified for future financial assistance. And male students 18 or older who indicate on the FAFSA form that they haven't registered for the draft have also been disqualified from receiving financial aid.
These two questions will still be on the application, but having a drug conviction and not registering for the draft will no longer impact students' ability to receive federal financial aid.
According to the Federal Student Aid website, there will be a few other small tweaks, including a visual website update and the ability for users to indicate whether they're a student, a parent or a preparer, prior to beginning the FAFSA application.
This year, filling out the FAFSA application may be a bit tricky for some families who received Covid-19 unemployment benefits under the CARES Act, says Chany.
Some families who received the increased employment benefits may have earned higher incomes in 2020 and 2021 compared to past years. Plus, the unemployment compensation exclusion (UCE) passed on March 11, 2021 allowed for a tax break of up to $10,200 for jobless people who were collecting unemployment.
Tax filing season began in Feb. 2021, before the provision was passed, so those who filed their taxes earlier couldn't initially claim the tax break. The IRS did make an adjustment for filers when sending out refund checks.
But this presents a problem for those early filers who are now filling out the FAFSA form for their students this year. Without the UCE tax credit stated on their tax forms, they have essentially overstated their income and as a result, it could lower the amount of federal student aid those families can receive.
"The provision to allow for up to $10,200 in unemployment income to be tax-free had not yet been passed when some people filed their tax returns in February or early in March," Chany explained. "The IRS said that early filers didn't need to amend their tax returns, and they would still grant them that tax credit. The issue there is for those people who filed early and are using the IRS Data Retrieval Tool on the FAFSA form, their income will be overstated because the Data Retrieval Tool will pull the originally filed data prior to the IRS's adjustments for the UCE. That UCE tax break would have reduced their adjusted gross income."
Guidance from the office of Federal Student Aid encourages Financial Aid Administrators to work with affected families to use their professional judgment to appropriately adjust the family's adjusted gross income on the application.
For families who are worried about how a lack of a UCE tax credit could impact their FAFSA application, Chany recommends they wait for additional guidance before filling out the FAFSA application as long as their student isn't applying to or attending schools in states that provide financial aid on a first come, first serve basis.
There are 13 states that award aid this way: Alaska, Illinois, Kentucky, Missouri, Nevada, North Carolina, North Dakota, Oklahoma, Oregon, South Carolina, Texas, Vermont and Washington.
"It only helps to file early if the school gives money on a first come, first serve basis," he said. "Otherwise, there is no advantage to filling out the FAFSA application immediately after it opens on Oct. 1. It's better to wait and make sure you have the tax guidance you need to fill out the form properly."
To begin filling out the application, students and parents should go to fafsa.gov to register, log in or to print out a paper copy of the application. Families will need to first enter biographical information about the student, including their full name, permanent mailing address, birth date, social security number, driver's license number, email address, citizenship, alien registration number (if applicable) and marital status.
Students will also have to indicate whether they're registered for the Selective Service (if male) and whether they've ever received a drug conviction (but the answers to these questions will no longer impact your eligibility to receive financial aid).
Students will also enter information about the high school they attend and the college degree they are seeking.
The next section relates to the student's tax filing status and will include questions about the income tax return that was filed for 2020, tax filing status, Schedule 1 filing and adjusted gross income for the student and their spouse (if applicable). There will also be questions related to child support, education tax credits, any scholarships obtained and other programs or federal distributions you might have received.
The third section includes questions to determine whether the student's parents need to share their income and tax info in order to qualify for federal aid. Generally, students who are dependents will need to report information about their parents' income and tax returns on the FAFSA application.
Once it's determined whether the parent's information is needed, parents will input their own biographical information and answer questions related to their adjusted gross income, wages, taxable income and assets.
The next section is meant only for students who are not dependents and asks for information on their household. And for the final two sections, students fill in the names of the colleges they wish to receive financial aid for.
It helps for students to know the federal school code for each institution, which can usually be found on the financial aid page of the college's website. But if they can't find it, they can simply write in the name of each school. Then all that's left is for students and parents to sign and date the form and submit it.
This information can be seen in an application draft on the Federal Student Aid website, or it can be found along with extra tips and guidance in Chany's latest 2021 edition of "Paying For College 2022: Everything You Need to Maximize Financial Aid and Afford College."
Keep in mind you'll need to reapply for aid every year you're in school. The actual time it takes to receive your financial aid award letter — outlining how much aid you'll be receiving — will vary from school to school. However, schools typically send out award letters within three months of receiving students' FAFSA information from the Department of Education.
The last day to fill out the FAFSA application for the '22-'23 school year is June 30, 2023. The form can still be filled out and submitted even while you're still applying to colleges and haven't been accepted yet.