When parents fill out the arduous 100-plus questions of the Free Application for Federal Student Aid, or FAFSA, it’s a snapshot in time. You add up all your current account balances and cash — down to the change in the cup holder in the car, some fear.
And then the system ingests your taxes from two years prior to the application school year, now lyrically referred to as the prior prior year’s taxes. So for the FAFSA that parents are filling out now in 2022 for the 2023-2024 school year, it uses your 2021 taxes. Is everyone still following?
What’s distinct about the predicament this year: A lot has happened.
For one thing, some 19 million people still might not have yet filed their 2021 taxes, and face an extension deadline of Oct. 17 — unless they qualify for additional time due to Hurricane Ian.
But the real issue for many families is that the economy is rough. College savings invested in the stock market have faltered as the S&P 500
has fallen into a bear market. Even those who shifted to bonds
likely have losses. At the same time, families crunched by inflation may have had to put ongoing savings earmarked for tuition toward the grocery budget. And most of all, with talk of a recession looming, family income is on the line.
“Everyone is concerned and frustrated,” says financial aid expert Jodi Okun, owner of College Financial Aid Advisors, based in Los Angeles, and author of “Secrets of a Financial Aid Pro.”
It’s very likely that the picture the FAFSA paints does not resemble how you see your current financial situation, which is a problem, because what’s on the form is what colleges are going to use to determine your bill. This also goes for the CSS Profile used by many private colleges, which asks even more questions about your current financial picture, but also uses the prior prior year’s taxes.
“Some people have a pretty decent spread between what their economic income is and what their tax return might reflect,” says Eric Bronnenkant, head of tax at Betterment.
If you’re mired in this process, here’s some advice from college pros on what to do if you don’t think you’re getting the better end of the deal on the mismatch of information.
1. Fill out financial-aid forms as soon as you can
The guidance from the Education Department itself is to fill out the forms with your 2021 tax information, even if you know it has changed.
When the FAFSA first opens in October, the website can be buggy, so you don’t necessarily have to be first in line. But experts generally advise you to do it sooner rather than later, because some schools give out money on a first-come, first-served basis.
If you think your situation may change in the next few months, but hasn’t yet, it’s still best not to wait, says Okun. Deal with the changes when they come.
A side note: Even if you don’t think you’ll get aid, still fill out the financial aid information to qualify for federal loans, or in case your situation changes in the next year.
2. Assess your overall financial situation
The success rate for appeals can be low, says Robert Farrington, founder of The College Investor, so you want to be sure that you have a good case.
“If you have a 10% change or more in income, it’s worth having that conversation,” he says.
Income is the major driver for calculating the expected family contribution through both the FAFSA and CSS Profile. Unfortunately, the dips in your college savings balance caused by market turmoil
won’t matter much to colleges. Parental assets, such as a 529 college savings plan, only make up around 5% of the formula, so even a significant drop in value won’t translate into much in real dollars.
“Parents say to me, I had $50,000 and now it’s $30,000, everything has gone down, and they feel vulnerable,” says Okun. But the most they can do is report the balance accurately at the time they fill out the forms.
On the plus side, if the balance goes back up between that point and the next time you have to fill out the FAFSA the following year, there’s no obligation to go back and report it, says Okun.
These are the types of situations that count for changing financial aid that won’t necessarily show up on the forms, according to Okun:
A drop in income
High medical expenses
Private school tuition for a younger sibling
Costs for elder care
Death of a parent
Divorce or separation of the parents
Natural disasters that impacted the family
3. Do your 2022 taxes early
If your financial situation worsened in 2022, especially after you fill out the FAFSA, rush to file your taxes as soon as you can, typically in mid-February 2023.
“If your adjusted gross income is less by $5,000 or $10,000 or more, do an appeal,” says Okun. This will be easy proof to add to your argument.
4. Contact the schools to let them know
To apply to college, your student has to do essays, but your letter to financial-aid offices could be the most consequential writing in the whole process.
“What I recommend, first of all, is kindness and sweetness,” says Okun.
Financial-aid officers read thousands of appeals letters, and everyone’s asking for more money. So be truthful, clear and organized, and get to them as soon as you can. Farrington says there’s a second opportunity in May, after the schools know who’s accepting.
“Most people have a very empathetic, compassionate story. Use that language. The aid officers are humans. If they can help, they will,” Okun says.
Above all, have a Plan B. Because if your appeal is not successful and you don’t get the amount of aid you need, then you might want to consider a school where you can get a better deal.