What Every Parent Should Know About the New College Financial Aid Rules

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While school just started for many, if your child is college-bound or in college, it's already time to start planning for the next school year. Many families rely on the Free Application for Federal Student Aid (FAFSA) to help shoulder the costs of college, and there have been many new changes to the program. These new changes go into effect this October, so listen up.

New Application Start Date

In the past, families would submit the FAFSA form at the beginning of the new year. However, the new start date is now as early as October 1, 2016. This is a huge change, and if you are in college or have a child in college, you will want to fill the application out that day, or at least in the first few weeks of October.

For some states, FAFSA aid is distributed on a first come, first served basis. Individuals who apply earlier have a better chance of receiving aid, including grants, work-study, and federal loans.

Change Tax Information Submissions

Another big change is that individuals will not be required to submit the previous year's taxes, but instead tax information from two years prior. This means for the 2017–2018 school year, families will send in 2015 information. For families that filled out the FAFSA for the 2016–2017 year, this means you will be sending in your 2015 tax info two years in a row.

This change will make filling out and submitting the FAFSA on time a lot easier, since families used to begin the application process at the beginning of the year. Many families would have to estimate tax information and fix it later on.

Less Asset Protection Could Mean Less Aid

When parents report their finances for their child's FAFSA, a portion of their assets, including savings and investment funds, is not calculated as part of the Expected Family Contribution (EFC). This was good news for families with healthy investments but not a lot of liquidity to pay for college.

However, the dollar amount of assets exempt from the EFC will drop this year, and will continue to drop in following years. This change could mean less financial aid for many families. This will affect middle-income families that were relying on financial aid the most. However, families with lower incomes will most likely not feel the change.

Don't Fall for These FAFSA Myths

Even though there were three major changes to the FAFSA this year, it is still a free form that all families should fill out. Don't fall for these common FAFSA myths and leave money and aid on the table.

1. My Child's Grades Are Not Good Enough

While some schools use FAFSA applications to award merit-based aid, most aid is needs-based. A good portion of financial aid is awarded based off a family's income and size.

2. I Make Too Much Money to Qualify

Many families often forgo applying for financial aid because they believe they make too much. Even if your income makes you ineligible for aid, colleges give out federal student loans through the FAFSA process. If you plan on taking out federal student loans, which are preferable to private student loans, then you must fill out the FAFSA.

3. I Didn't Qualify Last Year

It is wise to apply for FAFSA each year, even if you didn't qualify for aid the year before. There could be unseen changes to your family that you might not have accounted for, such as two children in college rather than one. Also, with the new changes happening this year, you might qualify for aid.

4. The FAFSA Is Too Confusing to Fill Out

This year, you are now allowed to skip questions that do not relate to your family's financial situations. This should make the process a little easier and streamlined. If you are still having issues with your application, there are many free resources online and offline that can help. Please remember that you should never have to pay someone to file this application, nor should you pay for information regarding the process.

Circle October 1st on your calendar and have your tax information ready and easy to access. Even if you don't think you will qualify for aid, apply anyway. And remember: You must apply each and every year your child is in college. This isn't a one-time thing.