Archive for the ‘Scholarships & Financial Aid’ Category

There Will Be Two FAFSAs in 2016

yale-79268_640If you think the Free Application for Federal Student Aid (FAFSA) is a long and complicated way of applying for financial aid, just wait. There will be two FAFSAs in 2016, and both will be based on 2015 income and tax information.

The 2016-2017 FAFSA application season opened on January 1, 2016. Just as in previous years, the 2016-2017 FAFSA is based on income during the previous tax year, also known as the prior year.

The use of prior-year income tax returns adds complexity, because families must file the FAFSA and federal income tax returns at the same time. But, because many colleges and state financial aid programs have very early deadlines, families need to file the FAFSA before they file federal income tax returns, even though the FAFSA refers to specific lines from the federal income tax return.

Starting with the 2017-2018 FAFSA, however, the FAFSA is switching from prior year (PY) to prior-prior year (PPY).

The use of two-year-old income and tax data instead of one-year-old data will allow the FAFSA season to start three months earlier, on October 1, 2016, instead of January 1, 2017. Most applicants will have already filed their federal income tax returns by then, even if they used the automatic 6-month extension. This will eliminate a lot of the conflict between FAFSA deadlines and tax return timing.

This change will also allow more applicants to use the IRS Data Retrieval Tool. The IRS Data Retrieval Tool transfers income and tax information from federal income tax returns into the FAFSA, simplifying the form. This will also save families time and hassle later, since data elements that are transferred unmodified from a federal income tax return to the FAFSA are not subject to verification.

The switch to an earlier start date for the FAFSA will also allow the FAFSA to be filed at the same time as applications for college admissions.

During the transition from PY to PPY, there will be two FAFSAs in 2016. The 2016-2017 FAFSA began on January 1, 2016, and the 2017-2018 FAFSA will begin on October 1, 2016. Both will be based on 2015 federal income tax returns.

Some families have asked what they should do if their 2016 income is lower than the 2015 income when they are filing the 2017-2018 FAFSA. The FAFSA uses the base year income as a proxy for income during the academic year. If 2017 income will also be lower than 2015 income, it is worthwhile to file a financial aid appeal with each college’s financial aid office. Some colleges call it a professional judgment review. It is also worthwhile to appeal for more aid if your income varies a lot from one year to the next. The colleges may ask for copies of the last 3-5 years of federal income tax returns.

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How to List More Than 10 Colleges on the FAFSA

number-437928_640Most students apply for admission to ten or fewer colleges. But, some students feel the need to apply for more. Perhaps they are worried about getting into at least one college with a good financial aid offer.

Yet, when it is time to fill out the Free Application for Federal Student Aid, also known as the FAFSA, they find space to list only ten colleges.

How do you list more than ten colleges on the FAFSA?

Follow these steps:

1. Start by listing an in-state public college first. Some states require a state school to be listed first to consider the student for state grants.

2. Next, list the colleges with the earliest financial aid deadlines.

3. Wait until you receive your Student Aid Report (SAR). This is a sign that the colleges on the FAFSA have received your FAFSA information. (The colleges’ version of the SAR is called an ISIR, or Institutional Student Information Record.)

4. After you receive your SAR, login to FAFSA on the Web at Delete the original list of ten colleges and substitute a new list of ten colleges.

Repeat this process as many times as necessary to list all of your colleges, each time waiting until you receive a new SAR before listing the next batch of colleges.

It is also possible to add colleges to your FAFSA by using the data release number (DRN) from your SAR. You can give the DRN to a college and the college can then add itself to your FAFSA, pulling down your FAFSA data. Alternately, you can call the federal student aid information center at 1-800-4-FED-AID (1-800-433-3243) and ask them to add the colleges to your FAFSA. They will need your DRN to do this.

If you need to update the other information on your FAFSA, such as correcting the income information after you file your federal income tax returns, don’t worry. All of the colleges that you have previously listed on the FAFSA will have access to the updated information.

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Your Student Loan Glossary

signature-962355_640We get it – student loans are confusing. Before you sign on the dotted line, review our glossary of student loan terms to make sure you know what’s in your contract!

Here are just a few of the common terms you’ll come across when you’re reading through your student loan paperwork

Accrue: To accumulate interest on a loan. For example, your loan may accrue 4 percent interest.

Aggregate loan limit: The cap that renders students ineligible for qualifying for additional loans. Each student’s aggregate loan limit may vary.

Annual loan limit: This is the maximum amount of loans you qualify for each school year.

Bankruptcy discharge: The process of having your student loan cleared in bankruptcy court. This requires the borrower to prove repaying a student loan would cause undue hardship.

Borrower: The person who signs the loan and agrees to its terms and conditions. This could be you, your parents, or another trusted relative.

Consolidate: The process of combining several loans into one loan.

Cosigner: A co-borrower who assumes responsibility for repayment of the loan if the primary borrower defaults.

Cost of attendance (COA): The total amount it will cost to attend a school.

Credit score: A number that determines how likely someone is to repay a loan based on their credit history.

Default: Failure to pay the loan and comply with the terms agreed upon. This occurs when the borrower is 270-360 days delinquent on a federal student loan and 120 days delinquent on a private student loan.

Deferment: A period during which a borrower does not need to repay the principal on a loan. If a subsidized loan is deferred, the federal government will pay the interest accrued during the deferment period

Delinquency: The status of a loan that hasn’t been paid on time.

Disbursement: The portion of a federal loan your school pays out (typically by applying the money to your school account or paying you directly).

Discharge: When a borrower is relieved of a loan. Loans can be discharged in rare cases, for example of the borrower is rendered totally and completely disabled.

Discretionary income: Income remaining for spending, saving, or investing after basic necessities have been paid. The common definition is your family’s adjusted gross income (AGI) minus 150 percent of the poverty line.

Expected family contribution (EFC): The number that determines your eligibility for financial aid. This number comes from the information you provided on your FAFSA.

FAFSA: Free Application for Federal Student Aid. This is a free document anyone can fill out to determine how much aid they’re eligible for.

Financial aid package: The combination of different types of financial aid offered by a variety of sources.

Financial need: The cost of attendance minus your expected family contribution.

Fixed interest rate: An interest rate that doesn’t change during the period of the loan.

Forbearance: A period during which a borrower can stop making loan payments or reduce monthly payments. Interest continues to accrue during this period and the borrower is responsible for paying this interest.

Forgiveness: When a borrower is relieved of a loan. Loans can be forgiven if a borrower meets certain criteria, for example making a certain number of payments and commits to a public service job for a specified length of time.

FSA ID: A username and password that gives you access to Federal Student Aid’s online systems and serves as an online signature.

Grace period: The period of time after graduation or dropping to part-time student status during which you aren’t required to pay loans. This typically lasts six to nine months.

Grant: A monetary gift that doesn’t require repayment. These are often based on financial need.

Holder/loan holder: An entity that holds the borrower’s loan promissory note and can collect payment from the borrower.

Interest: The fee charged when you borrow money.

Loan: Money borrowed that must be repaid.

Loan period: The portion of the academic year you request a loan for.

Loan reference number: The identifying number associated with a Direct PLUS Loan Request.

Loan rehabilitation: An option that for getting your federal student loan out of default.

Loan servicer: The entity for maintaining and collecting payments on student loans.

Master promissory note (MPN): The legal document that signals your commitment to repaying your federal loans for a continuous period of enrollment of up to 10 years.

Perkins loan: A loan for students with exceptional financial need administered under the Federal Perkins Loan Program.

PLUS loan: A loan available for graduate/professional students or eligible parents of undergraduate students.

Prepay: Paying off all or part of a loan before it’s due.

Prepay penalty: A fee charged for paying off a loan early. These fees do not apply to federal or private student loans.

Principal: The loan amount borrowed plus any capitalized interest.

Promissory note: The legal document that signals your commitment to repaying your federal loan.

Refinance: Financing your loan again, typically to gain more favorable interest rates or otherwise change the terms of the loan.

Repayment: Paying back money to your loan holder or servicer.

Repayment plan: A plan for paying your student loan debt.

Stafford loan: A federal loan available to undergraduate students. The U.S. Department of Education pays the interest on these loans while a borrower is in school at least half-time, during the six-month grace period after leaving school, and during deferment periods. These are also known as Direct Subsidized Loans.

Student aid report (SAR): A summary of the information on your FAFSA that determines your expected family contribution (EFC).

Subsidized loan: A federal loan that generally does not require the borrower to pay interest while the borrower is in school or in a grace period.

Totally and permanently disabled: Borrowers who can prove they are totally and permanently disabled and thus unable to work may qualify to have their student loans discharged.

Unsubsidized loan: A federal loan the borrower is responsible for paying interest on, regardless of the loan status.

Variable interest rate: An interest rate that changes over the period of the loan.

Wage garnishment: The process of deducting money from a borrower’s salary if the borrower defaults on his or her loan.

William D. Ford Federal Direct Loan Program: Student loans provided by the Department of Education for students attending participating schools.

Looking for information about financial aid? We have another cheat sheet on financial aid terms to know.


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