How the New FAFSA Rollout Can Affect Your Financial Aid

The transition from high school to college is an exciting time. But this year, it has been marred by a difficult rollout of the Free Application for Federal Student Aid (FAFSA).

This form is critical for college students to receive financial aid to attend college. Unfortunately, the difficult FAFSA rollout has resulted in uncertainty for many incoming college students and their families, with many new students wondering if they should go right into the job market. Let’s take a closer look at the FAFSA rollout, how it has impacted students and their families and what families can do going forward to help their children achieve their college goals.

What Is the FAFSA Simplification Act?

For current and incoming college students to receive work-study funds, loans and federal grants, they need to fill out the free FAFSA form. It also gives students access to federal student aid funds, which is the largest source of financial aid.

The FAFSA Simplification Act overhauled the entire FAFSA process, which was supposed to make the process simpler and shorter. The changes included:

• Adjustments in the methodology used to determine the aid a student is eligible to receive.
• Adjustments to how family size is determined to align more with what’s reported on the student’s or parents’ tax returns.
• Expanded access to Pell grants for more students.
• Simpler and more streamlined forms.

The purpose of these changes was to make the FAFSA less intimidating for families without college experience and to adjust the formula to expand aid. Many families found the FAFSA process to be tedious and difficult, but the adjustments that were supposed to be simplified ended up being even more complicated.

How the FAFSA Rollout Impacted Current and Aspiring College Students

The new FAFSA rollout consists of a section to be filled out by students and another section to be filled out by parents. But many current and aspiring students fill out their portion of the form only to find that their information doesn’t show up on their parents’ account.

This problem along with several other bugs has been happening across the country, and parents who call the Education Department face long wait times. This has a significant impact on students and their families.

Many students may be receiving their diplomas without knowing how they’re going to pay for college. One of the options they may be considering is to delay enrollment or not go to college altogether and enter the job market instead. These issues can drastically drain the momentum and excitement from families sending their children to college.

Resources for Students Impacted by the FAFSA Rollout

The FAFSA may be the largest way to receive financial aid, but it isn’t the only one, which means that college may not be out of reach for these impacted students. Additional financial resources for students include:

Scholarships

This is an excellent form of aid because it doesn’t have to be repaid. Scholarships can be merit-based, need-based or both. This can be included in the aid package from FAFSA, but scholarships are also available through financial institutions, schools and more.

529 college savings plan

A 529 college savings plan is designed for families to save for educational expenses. This plan is a state-sponsored saving and investment fund that can be used tax-free to pay for any qualifying expenses such as books, room and board and tuition.

There are two separate 529 college savings plans. One is a fund where money can be invested into mutual funds or other investments. The other is a prepaid tuition fund, which enables families to pay for tuition in advance at the rate that tuition is now.

Home Equity Line of Credit (HELOC)

A HELOC enables families to tap into the equity in their home to afford large purchases such as tuition for their child. A HELOC is a revolving form of credit similar to a credit card—once the balance is paid off, it remains open and available for future needs.

Certificates

A Certificate is a savings product with a fixed maturity date and interest rate. It requires a minimum deposit and you’ll generally receive higher interest on your savings than you would with a normal savings account. In turn, you agree to not take out funds until the maturity date is reached.

Trusts

A trust enables you to move money into a specific fund that your child can use for educational expenses. With a trust, you have a lot of flexibility with how the funds are managed and used. However, it’s important to note that the beneficiary of the money (your child) can do whatever they want with it.

Alternative Options

One option is to start out at a community college and then transfer those credits to a four-year university later. This can help save money, especially if there’s the option to attend the community college at a reduced cost or for free based on merit.

Another option is to consider other loan types, such as loans from a credit union. Personal loans through financial institutions often offer greater flexibility tailored to your needs and competitive interest rates — essential to ensuring you’re not repaying more than you need to later.

What Savings Options to Consider When Saving for College

There are plenty of options available to families when it comes to saving for college. Find out what’s available to you and your family with our comprehensive College Savings Plans guide.