The U.S. Department of Education has recently announced new regulations for the 2014-15 academic year that impact how students filing for federal financial aid will complete their Free Application for Federal Student Aid (FAFSA) from this year forward. Furthermore, these changes play a strong role in how a dependant student’s family income will be used to determine eligibility.
Although the U.S. government’s decision to recognize same-sex and unmarried parents on the FAFSA marks an achievement for many, some families may be concerned about how it could affect a student’s financial aid. Here is an overview of the new regulations to keep everyone informed of what to expect when completing their FAFSA this year.
Impetus Behind the New Regulations
According to Inside Higher Ed, the new regulations are the result of a Supreme Court decision made in June of 2013. This decision declared invalid the portion of the Defense of Marriage Act that prohibited federal agencies from providing legal recognition to same-sex marriages. Now that this policy change has been made, the federal government is free to apply the same treatment to same-sex marriages as they have been to heterosexual marriages in past years. It is also important to note, however, that prior to this decision, the U.S. Department of Education already had changes put into motion to make the switch to gender-neutral language on future FAFSA forms so that both parents from unmarried couples who live together could be used to determine household income.
New Requirements for Dependent Students
There are several factors that determine a student’s status as either dependent or independent. While individual circumstances can play a role in this determination, most undergraduate students under the age of 24 are declared as dependent if they are unmarried and not raising children of their own. In the past, dependent students who lived with same-sex or unmarried parents only had to claim the income of one of their parents. On the new form, students will be instructed to include household income using gender-neutral language that also takes into account recognized same-sex marriages and unmarried couples so that all of a household’s income can be used to calculate a student’s estimated family contribution.
How Do the FAFSA Changes Impact Students and Families?
According to a letter released by the U.S. Department of Education, the new regulations are expected to affect only a small percentage of students due to the fact that over 60 percent of FAFSA filers are classified as independent. Out of the remaining filers, an estimated 20 percent will not notice the changes because their parents are classified as heterosexual married couples and have already been recognized on the application in past academic years. The remaining students will find that their family dynamics will affect the determination of their estimated family contribution. For some of these students, the additional income could reduce the amount of aid they receive through federal, state and privately-funded financial aid programs. Other students may find that the addition of an extra family member generates an increase in the amount of aid they can receive. While this does represent a shift in how financial aid is distributed, the federal government maintains that this will ensure fairness among all families who apply for aid.
Changes in the Application Process
When students and their families complete the FAFSA for this academic year, the most obvious change will be the use of gender-neutral language. Instead of using the terms “mother” and “father,” students will be instructed to list the income of each “parent.” For the purposes of the application, both biological and adoptive parents who live in the same home as the student must be included. Students who live with heterosexual married parents will continue to complete their application as it has been done in the past; however, those who live with same-sex parents who are in a marriage legally recognized by their home state or foreign country will list their parents’ marital status as “unmarried and living together”. Follow-up questions to this response will then include the new gender-neutral language.
Completing the New FAFSA
Now that same-sex married and unmarried parents are to be included on the FAFSA, some questions will arise when it is time to submit tax return information. The current IRS Data Retrieval Tool is unable to provide separate financial information for parents who file separately regardless of their sex or marital status. Therefore, special instructions will be provided during the application process for students who have separate tax forms filed for their parents that pertain to how they should answer questions regarding tax filing status and adjusted gross income for the family.
Every student and their family applying for financial aid using the FAFSA this academic year should be aware of the changes that will affect how they should respond appropriately to questions regarding their current living arrangements and dependent status. While the recognition of same-sex married and unmarried parents on the FAFSA will impact the amount of financial aid that students receive, these new changes are meant to provide a more accurate report that will ensure fairness for all students who can benefit from having financial aid to fund their education.
About the Author:
Today’s guest article comes from Greg Mitchell. He is a freelance financial blogger and proud resident of Houston, Texas. He encourages all local families to carefully look at how recent developments in their lives, such as new marriages or divorces in Houston, could impact their FAFSA applications.