In yet another ‘never a dull moment’ moment in higher ed, President Obama announced yesterday some pretty broad-sweeping changes to the Federal financial aid system.  Though these changes will not afffect current 12th graders – at least for this year — they will have a pretty large and fairly IMMEDIATE impact on many current 11th and 10th graders and the parents who love them.

Which, as most of you know, includes Jill and me – and our 11th grade daughter — who had a snarky (unpublishable) response to our weekend dinner table discussion about how this, the newest overhaul to ‘unfairly (her word) or disproportionately (our word) affect her and her 2017 classmates.  You can read about the other one, the major changes in Admissions testing, here.

But for today, I really want to spend a little time discussing how the latest financial aid news will change how the federal system works; and more importantly, what you should be doing in response. 

To start, I want to be clear on this one point: thus far, the ‘new rules’ apply only to The Department of Education’s rules and instructions for applying for FEDERAL financial aid through the Free Application for Federal Student Aid or the ‘FAFSA’.   And although all colleges and universities require a FAFSA, most of the best awards and scholarships (especially for middle and upper-middle income families) do come NOT from the government via the FAFSA, but from the Institution’s own coffers (in Endowment Awards for need and non-need based scholarships and grants).  Please keep that in mind as I explain how the federal financial aid system works now and how it will change.

In short, the federal financial aid system is based on a set of regulations, which are published by Congress.  These regulations are public domain and can be found in the Higher Education Act, Titles I-VI – approximately 568 pages of (very small print) rules, instructions, terms, and requirements for receiving federally-funded financial aid grants (Pell Grants) and loans (subsidized and unsubsidized).  Now contained within these 568 or so pages are 78 unique factors (give or take), each weighted differently, that comprise the basis for calculating your Expected Family Contribution -your ‘EFC’ (what the government determines and reports to the colleges on your list that you can afford to pay for one year of college for one student).

As it stands today, in order to find out your official EFC, you have to complete a FAFSA, which as in years past will not be ‘open’ until January 1. That means that the government and the colleges use your financial data from the fiscal year that immediately precedes your child’s senior year (for the class of 2016, for example, the EFC calculations will be based on your 2015 income and assets) to determine your eligibility for grants and scholarships.  Therefore, as its been and will be this year, most people will never learn what they’ll be ‘expected to pay’ (and therefore can’t take action to manage that number) until well after their children have applied to college.  Which can lead to a lot of consternation in April.. and money left on the table (estimated that 2 million people every year fail to maximize their eligibility for grants and scholarships – note that only about 3 million students graduate from HS every year – so 2/3 of students are paying more than they should for college)

So it shouldn’t surprise you that we’ve railed against this system for years.  We never want our students to have a ‘cost-blind’ admissions strategy, and we certainly never want anyone applying to a particular college wiithout first knowing whether their parents can afford it.   Why?  Because affordability is a cornerstone of any appropriate admissions plan and with sufficient lead time and accurate information, we can use those numbers to make sure our students have affordable college options, not to mention that we can take steps to legally and ethically reduce a family’s EFC and out-of-pocket costs for college. (Full disclosure, in our practice we have software and tools that accurately calculate your Federal and Institutional EFC so that you can get an accurate cost comparison/what if scenario to work with well before their children even finalize their college list.)

So here’s the good news.  Among the changes announced yesterday, by far the most impactful is the restructuring of the FAFSA Timetable. Beginning in Oct of 2016, the FAFSA will now become available on Oct 1. On one hand, this will clearly make cost projections more transparent for many more families. That’s a clear upside.

Now the downside:  It moves the timetable for everything admissions AND funding up by a lot.  If you have an 11th grader, for example, you have just a little more than 3 months to take action to minimize your EFC and maximize your child’s chances for scholarships and grants. Your entire EFC calculation will be based on this tax year (as in 2015) – as well as next years.  So, any changes or adjustments that you need to make to manage your EFC should be done before the end of this year!  Furthermore, this puts 10th grade parents ON THE CLOCK – your look-back period (financially speaking) will begin on Jan 1.  If you are going to make any changes that will perhaps shelter some assets from the financial aid formulas, but cause an income-event, they should be taken care of before the end of this year as well!

Obviously, there is a lot more to the changes than this — and a completely different set of consequences, both intended and unintended, on the Institutional Endowment Scholarship side that we are analyzing as we speak (or write).

The best news is that we are going to be able to incorporate our findings and analyses into our program that we’re hosting live tomorrow night. This is a free, live and clearly just-in-time discussion that takes you behind the scenes of college admissions and funding.  We’re going to be peeling back the curtain on many of our advanced planning strategies – and how we’re adjusting our systems to optimize our client’s funding plans so they can maximize their financial aid and scholarship opportunities.  If you have a student in HS (especially in 10th or 11th grade), you won’t want to miss this class.  It’s going to be a live, interactive WEB-CLASS, September 16th at 7pm ET/4pm PT.  We’ll be on the line the whole time to answer all of your questions. and it’s free and full of information for today’s college realities.  .

You can register here.  

If you have a student in high school, I really hope you’ll join us for what will be a jam-packed and potentially game changing call.  

Please let me know if you have any questions (info@collegeplanningadvice.com).

– Peter

p.s. We are holding a special client-only ’emergency’ financial aid learning lab and office hours Sunday as well. If you’re a client receiving this email, look for your private invite to Sunday’s program to arrive in your inbox soonest.

P.P.S. PLEASE share this with a friend with high school age children. They’ll thank you for it!

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