A Simpler FAFSA?

For  some parents, the FAFSA form has gotten simpler.

And you can thank the Internal Revenue Service for that. Families which complete the online application for the spring 2010 semester will be able to push a button and import their IRS tax figures right into their Free Application for Federal Student Aid.

Thanks to the IRS’s involvement, parents won’t have to track down their tax returns or search through their tax records for answers. Families will be able to eliminate up to 18 questions on the form. What’s more, since the IRS is providing the data, families can’t mistakenly supply the wrong numbers.

For many advocates of FAFSA simplification, gaining instant access to IRS returns is a no brainer. Ninety percent of students and families, who file the FAFSA, are giving the federal government financial information that it already possesses.

“Families have already told the federal government this information so they shouldn’t have to tell them again,” argues Sandy Baum, the College Board’s senior policy analyst.

But here is the bad news: The IRS will only help FAFSA filers who are applying for aid for the spring 2010 semester. Most families, however, will be completing their federal financial aid form for the 2010-2011 school year that begins in the fall and they’re on their own.

So why are some families receiving IRS help and not others?

Parents seeking financial aid for the spring semester get to use their older 2008 income tax data. In contrast, parents who will be applying for aid for the traditional fall start, must pull numbers from their 2009 income tax returns. The IRS can’t help these taxpayers because they might not have even filed their latest tax returns yet.

To roll the IRS program out nationwide, the federal government would have to be willing to allow all families to use a tax return that’s a year old. The Department of Education has the ability to extend the use of the older tax returns, but no decision has been made yet.

Is it a big deal if families use outdated tax returns when filling out their FAFSA application? While acknowledging there would be some winners and losers, Baum believes that the government should absolutely extend this pilot project to everyone.

If that happens, I’ll let you know.

Lynn O’Shaughnessy is the author of The College Solution and she also writes a college blog for CBSMoneyWatch.

Further Reading:

Financial Aid Applications: Should You Apply or Not?

Applying for Financial Aid: 5 Things You Can Do Now

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