Over the course of the past few weeks, CheapScholar.org has been covering the implementation of the new IRS Data Retrieval Tool that has been incorporated into the FAFSA filing process. The concept of making the information gathering process easier is a noble one but there has certainly been some challenges along the way.

Here are some of the informative DRT articles graciously provided by Mr. Randy Green, Financial Aid Director at Wittenberg University:

Digging up “DRT” on the New FAFSA IRS Linking Tool

Completing the FAFSA is the single most important step a family can take when trying to access funds to help cover educational expenses. Quite a bit of emphasis is put on families to complete the FAFSA as soon as possible. As a matter of fact, the FAFSA process allows for estimated tax information to be submitted if a family has not yet filed their taxes with the IRS.

Families that choose to submit estimated tax figures are required, utilizing information from their tax forms or via the IRS Data Retrieval Tool,  to go back into the FAFSA portal later and submit actual figures. The Department of Education sends reminders out to these families but for some odd reason they decided to send that notification out yesterday.

So, if you got that notification/email (see below), don’t worry, don’t despair, don’t call your financial aid office…you are fine. Just don’t forget to submit your actual figures after you file your taxes.

Email below has been graciously provided by one of our regular contributors, Mr. Randy Green.

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Subject: Important – Updates Needed for Your FAFSA

Dear JONATHAN,

When you completed your 2012-2013 Free Application for Federal Student Aid (FAFSA), you indicated that you were going to file your taxes and were providing estimated 2011 tax information.  Now that the federal tax filing deadline has passed and you have probably filed your 2011 tax returns, it is time for you to update your FAFSA.

You can update your FAFSA at www.fafsa.gov.  You should change your answer on the FAFSA (question 32) to reflect that you have “already completed” your tax return.  Once you’ve made this change, you will need to update the information you initially reported on the FAFSA to reflect the actual information from the 2011 tax return you filed.  If you filed a federal tax return with the IRS, when you access your FAFSA online, you may be eligible to use the IRS Data Retrieval Tool, which is the best and easiest way to provide accurate tax information.  With just a few simple steps, you can view information from your IRS tax return and transfer that information directly into your FAFSA.

If you are unable to use the IRS Data Retrieval Tool, you are still required to update the income information on your FAFSA so that it reflects the information on the 2011 tax return you filed.  The tax-related questions you should review on your FAFSA include adjusted gross income, income tax paid, number of exemptions, and income earned from work.  You should also ensure that your FAFSA correctly identifies the type of tax return that was filed (IRS 1040, 1040A, 1040EZ, foreign tax return, etc.) and that you have entered the correct amounts for Additional Financial Information (questions 43a-f) and Other Untaxed Income (questions 44a-j).

It is important that you make the necessary changes to the tax information so that your FAFSA includes the same information that was included on your tax return.  However, when making corrections based on your completed federal tax returns, do not update other information that was correct at the time you filed your FAFSA.  For example, do not change your answer for household size (question 93) or for number in college (question 94); unless your answer was incorrect as of the date your FAFSA was originally signed.

Your ability to receive federal student aid can be impacted if you do not make the necessary updates or corrections.

Thank you for your attention to this important matter.  If you have additional questions regarding the IRS Data Retrieval Tool, online help is available.  Visit www.fafsa.gov and click the “Browse Help” feature on the FAFSA home page for information on the tool and the FAFSA process.

U.S. Department of Education

Federal Student Aid

The following is a guest article submitted by Mary Fallon from Student Aid Services.

Accuracy Counts

Federal aid applications are rejected by the federal government for errors from miscalculating adjusted gross income to not signing the form. Calculation mistakes can reduce an aid award even if an aid application isn’t rejected. For example, taxable income isn’t adjusted gross income. If parents have tapped into retirement funds, it should be added to either untaxed income or adjusted gross income, not both, or the Expected Family Contribution (EFC) will increase, and aid eligibility will decrease.

First-Come, First-Served

Those who file as close to January 1 as possible are in the best position to get all the aid they are eligible to receive. Using income estimates is allowed – even encouraged – and a student won’t lose their place in the virtual line by later updating the application with final income amounts.

Beat Deadlines

Most colleges and states have their own deadlines. The earliest deadline for the 2012-13 FAFSA is in four weeks – Feb 1, 2012. The longer a student waits, the more students get ahead of them.

Not All Assets Count

A primary residence, retirement plans, small family-owned businesses, and the cash value of life insurance don’t count as assets on the FAFSA. Some of the most common and costly mistakes are made by incorrectly reporting assets.

Dependency Surprises

Just because a student financially supports themselves, doesn’t mean they are independent under FAFSA rules. Many students are considered dependent until age 24 requiring parents’ income on their FAFSA. However, for children of divorced parents only the income of the parent with whom the child lived with the most during the past 12 months is counted.

Job Loss Relief

If a member of a household has had their job eliminated, a student may be eligible for more aid. Look for the ‘dislocated worker’ question and see if the family meets one of the four criteria. Dislocated workers’ assets are counted differently than others – typically helping reduce an EFC, which increases aid eligibility.

Double Check

Transposing numbers and mistyping are very common mistakes. Double check everything. There are hundreds of ways to make a mistake on a FAFSA. Having a professional check the answers can help ensure a student gets the most aid possible. Answer the FAFSA truthfully, accurately and completely.

Professional Help

While most high school counselors don’t have time or in-depth FAFSA knowledge to assist students, some communities host FAFSA-preparation events each winter. College financial aid officials may provide guidance to their students. Help from fee-based FAFSA preparation services is allowed, too. Some experts, such as Student Financial Aid Services, provide free or discounted services to low-income students and provide assistance in multiple languages.

Early Estimates in Minutes

Waiting for the spring arrival of aid award letters to learn a student’s aid eligibility and a college’s affordability is agony. Why wait? Check colleges’ Net Price Calculators (NPC) for an estimate of a full-time, first-time student’s aid eligibility and net price.  Advanced NPCs also estimate out-of-pocket cost and the total cost of a degree. The most reliable NPCs ask 30 to 40 questions, which takes about 10 minutes to answer. That’s insight into aid eligibility in the time it takes to make a sandwich. But remember, answering NPC questions, will not get a student their aid, preparing a FAFSA is required.

The following is a guest article provided by J. Randy Green, Director of Financial Aid at Wittenberg University

This morning, a local reporter called me with questions about student indebtedness.  She raised some interesting points on the recent changes made by the Department of Education to ease the repayment burden on federal loans.

For example, the new Income Based Repayment guidelines should not only reduce the financial stress imposed by education debt, but also allow graduates greater flexibility in selecting a job that best fits their skills and preferences.  Someone who will make a great teacher will now be more able to afford accepting that teaching position, rather than being forced to work in a different field for the higher pay it may provide.

But the reporter’s focus was on the level of indebtedness and how that has changed in recent years; this echoes many other stories I have read lately.   Having this focus risks ignoring two important facets of borrowing – the rate of defaults and the impact of borrowing on daily activity – and one looming challenge.

If a student borrows money to attend college, and after completing college is able to repay that money, then the system is working.  The student may choose to borrow more to attend a higher cost institution, or less to attend a lower cost one, but the decision is left to the student and the equation does not change.  A school should prepare a student to repay the loan taken to attend.  One measure of this relationship is the default rate, which is the percentage of students who default within a given period and which the Department tracks for every institution.

Independent of this, the amount a student borrows may impact other aspects of life – the ability to rent an apartment, to be offered a job at a bank, the rate of a car loan – but the most closely felt impact is on day-to-day bills and purchases.  A student shouldering a large monthly loan payment (large relative to monthly income) will be less likely to be able to afford the activity that drives the economy.

An item that has not been discussed recently is the fact that the interest rate charged to financially needy students is set to double on July 1, 2012.  Currently, subsidized Federal Direct Student Loans are made at 3.4%.  Unless Congress or the Department of Education takes action, these loans will carry a rate of 6.8% for 2012-2013 and beyond.  Regardless of debt level, this change will increase the repayment burden students already face, raising the risk of delinquency, default, and diverting borrower income from the economy and into the government’s coffers.

Given the tremendous level of attention given to the cost of education and the indebtedness of graduates, it seems appropriate for some discussion to occur about this pending increase in the cost of that borrowing.

Parents and students have to wait until January 1st before they can officially submit their FAFSA for the upcoming academic year (2012-2013). Very few actually submit the FAFSA on January 1st but I am guessing that there are always over achievers amongst us that make the process part of their New Year’s Eve tradition. A financial aid director friend of mine once shared his opinion on how the festivities probably take place for those that are on top of their FAFSA game: “Oh look the ball has dropped in Times Square. We should probably smooch because that is what everybody does. Ok, now lets go submit our FAFSA form!”.

You may not be like the families mentioned above, but for those that want to get a jump start on what to expect when filing the FAFSA, I am pleased to clue you in to the fact that a draft of the paper FAFSA for 2012-2013 is now available. You can access the PDF version here.

My hope is that none of you actually utilize the paper FAFSA to submit your information to the Department of Education. The paper version mentioned above is more for information purposes and provides some insight on what will be asked of you. I always recommend that you make use of the latest and greatest technology available at www.FAFSA.ED.gov to electronically submit your FAFSA. The Department of Education utilizes skip-logic technology to make sure you don’t answer redundant questions and they also provide a feature that allows you to import your tax information directly from the IRS (seems a little scary at first but definitely saves on time and limits mistakes).

I hope you find this information helpful. Remember, the FAFSA is the key to all things good when it comes to accessing financial aid to help pay for college. Make sure you designate time this coming year to get your FAFSA application completed. Your checkbook will thank you!

If you need additional help and/or guidance through the financial aid process,  please feel free to check out CheapScholar’s College Resource Page for more great information.

The Joint Select Committee on Deficit Reduction (aka The Super Committee) has until November 23 to come up with a plan to reduce the federal deficit. Certainly not an easy task… Unfortunately, federal student aid could be at the top of their list when it comes to cuts.

In an effort to help the Super Committee understand the importance of federal student aid and the role that it plays in college accessibility for our nation’s students, the Student Aid Alliance has started a petition in support of maintaining federal funding for student aid programs.

If you would like to help support this cause (which I hope you will), you can visit the online petition here. It only takes about 20 seconds to add your name to the list and as of the time of this blog post, it looks like you will be joining 92,940 people in a great cause.

Here is the actual wording of the petition:

Our nation sorely needs to power up its economic engine. Work force projections show that by 2018, there will be jobs for as many as 22 million new workers with college degrees, but on our current trajectory, we won’t make that goal—in fact we’ll miss it by 3 million workers.

Recent budget deals have already cut $30 billion from the student aid programs, sacrificing some students’ benefits to pay for others. States across the country are cutting higher education from their own budgets.

That’s why it’s more important than ever to preserve, protect and provide adequate funding for the core federal student aid programs—such as Pell Grants and student loan benefits. Together, these programs offer students an opportunity to acquire the knowledge and skills our nation demands for a strong recovery.

Tough budget decisions in DC have put pressure on all federal spending, but cutting student aid, a long-term investment in our nation’s future, doesn’t make sense.

I support protecting federal student aid. Keep college within reach for our nation’s students and families.

Click Here To Show Your Support Today!

A family begins the lobbying process for their fair share of federal student aid when they start the FAFSA process. However, before they can even begin to receive money from the various federal student aid programs, somebody else has to lobby for those coffers to be filled every year.  And, ultimately, it comes down to the federal government (our legislators) to appropriate the proper amount of funds to keep these programs in existence.

Our legislators will be coming together on July 26th to decide how federal dollars will be allocated for federal student aid programs. They have been provided a spending cap of $139.2 billion dollars. That may seem like a lot of money but it is drastically less than what has been allocated in prior years.

Justin Draeger is the president for NASFAA (National Association of Financial Aid Administrators) and he recommends that we all (students, parents, college administrators, education advocates, etc) do our part to “take action” and help make our legislators know that accessibility to education is important to us. Here are a few ways that you can help:

1. Contact your representative and explain the importance of the student aid programs and how even small cuts can affect students. NASFAA has provided letter templates to aid you in this process.
2. Share NASFAA’s “Faces of Student Aid” booklet with lawmakers to help them understand how cutting aid will impact all students.
3. Join the “Save Student Aid” campaign (on Facebook) and urge your students to do likewise. Stories shared through the Facebook campaign lead to media stories that have an impact on the student aid debate.
4. Pass this information onto others via your social media connections/conduits (Share Toolbar is below)

Federal student aid funding plays an essential role in helping students achieve their educational goals. Please take a moment to utilize the steps above to help spread the word about how important federal student aid is for our future scholars.