My financial situation changed - what tax information should I use for the FAFSA?

Question

My daughter will be attending school next year, and I am getting ready to complete the FAFSA. Last year I was able to retire, so I had a significant reduction in my income. The FAFSA is asking for tax information which is about two years old now, and it does not reflect my current financial situation. What should I do? Apply for the FAFSA using the most recent tax information I have? Or should I just apply using the information it is requesting.

Answer

It is not an uncommon scenario for parents to have a change in financial situation from year-to-year. Even if your tax return from two years ago does not reflect your current situation, when you complete the Free Application for Federal Student Aid (FAFSA)®, you will need to provide the tax information from the tax year requested. Luckily, the U.S. Department of Education provides the IRS Data Retrieval Tool to assist families in completing the financial part of the application.

Because you will need to complete the FAFSA with financial information requested, it may not accurately reflect your current financial situation, so you will need to take an additional step. After submitting your FAFSA, set up some time to discuss your current financial situation with the financial aid office of the school your daughter chooses. Let them know you had a major change in your financial situation, and would like them to consider your current income.

Schools participating in the federal financial aid programs have the ability to grant a change in your daughter’s Expected Family Contribution (EFC), based on the parent and/or student’s current financial situation. They will ask you to provide documentation which demonstrates the change in income. It will be up to them (the school) to grant a professional judgement, something they are able to do on a case-by-case basis.

Best of luck to you and your daughter!

The Edvisor®