College Aid – What Are The New Fafsa Changes in 2011?

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College Aid: What Are the New FAFSA Changes in 2011?
Is it Easier or Harder?

by Ian Welham

There are a number of important changes to the Free Application for Federal Student Aid (FAFSA) in 2011. Some are designed to make filling out the FAFSA easier. Some seem to make it harder. Here are the most noteworthy changes:

1. Starting in 2011-12, the Parent PLUS loan requires a FAFSA. This means many families who haven’t considered filing a FAFSA in the past should do so.

2. Completing the FAFSA should be easier in the sense that applicants are guided more throughout the process. There’s a searchable help option and a smarter school code search that is faster and more dynamic.

3. On the confirmation page, there is a federal loan estimate which provides applicants an idea on how much they can get in student loans. If you have questions, look up the potential federal financial aid available for you.

4. The automatic zero EFC threshold is now $31,000 (up from $30,000 last year).

5. Undergraduates and students from graduate and professional schools all have $5,250 available in employer tuition assistance.

6. The enrollment status question and TEACH Grant questions have been removed. High School Questions (specifically the school name, city and state) have been added. The reason for this addition is for schools to be able to encourage high school students who haven’t submitted their FAFSA forms to do so. (It’s estimated that a third or more of these students would qualify for a Pell Grant.)

7. The online form has been simplified, including a single login and single point of entry. You can also more easily start, continue and complete your application. Checking your status, viewing and correcting inputted data is also possible.

8. The new FAFSA form has more intelligent skip logic. For example, there are no asset questions when these don’t affect the eligibility of the applicant in the first place.

9. It’s believed that the EFC figure confuses students, so EFC has been moved to a less prominent location on the form. Those who are interested in EFC have to hunt for it.

10. When you make an error in your FAFSA application, you can easily correct these online. Contact college admissions for assistance.

11. It’s been recognized that the “Interested in Work-Study or Student Loans” question is confusing. So now the “not interested in student loans” part has been dropped. This makes sense because it does not provide meaningful information to the financial aid department and does not increase other forms of college aid.

12. Unlike in the past, the IRS pre-filling is available to students when they do their corrections on their FAFSA application.

13. The National Smart Grant and Academic Competitiveness Grant add-ons to the Pell Grant have disappeared. The reason: 2010-11 was the final year of funding for these programs.

14. The improved benefits of the Hope Scholarship tax credit afforded by the American Opportunity Tax Credit were set to expire in 2010. They’ve been extended to 2011. To review last year’s improvements: It’s now $2,500, not $1,800, 4 years, not 2 years, partially refundable, and not subject to AMT. Income phase-outs were also raised by 60% to $180,000 (joint filers) or $90,000 (single filers). Here’s how the accounting works: The American opportunity tax credit is equal to 100% of the first $2,000 in college costs (qualified tuition and related expenses) and 25% of the next $2,000, for a possible total of $2,500. Books, supplies, equipment and courses materials are now eligible for the credit.

15. The allowable deduction of $2,500 in student loan interest continues beyond the first 60 months of student loans and income phase-outs have not decreased.

16. There are improvements to the Coverdell Education Savings Account. For example, there’s now a $2,000 contribution limit (versus $500 prior). K-12 expenses are now eligible (not just college expenses). It’s also been extended for two years.

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