A Real Game Changer in College and University Financial Aid Continued:

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John W. Dysart
The Dysart Group

The Obama administration has initiated a major change to the traditional financial aid cycle for colleges and universities. It was announced on September 14, 2015. Determining eligibility for federal financial aid in the past has been based upon the prior year tax returns. During a normal cycle for students intending to enroll in Fall 2016, financial aid eligibility is based upon the completed 2015 federal tax returns. The use of ?prior year? tax information has been the requirement for decades. All of that changes for the coming Fall 2017 cycle.

Various groups, including members of Congress, have been concerned with the historic time frame for financial aid packaging. The use of prior year tax returns has meant that the financial aid packaging season has not commenced before January 1. For many families, this has often resulted in financial aid packages not being received until the Spring, and in some cases, the Summer. This has allowed little time for informed decision-making and financial planning. The new rules dictate that federal financial aid eligibility will now be based on prior, prior year. In other works, instead of aid calculations being based on?2016 tax returns for students enrolling in Fall 2017, they will, once again, be based on 2015 tax returns.

The implications for this change are significant and leadership teams at colleges and universities need to be prepared and appropriate action should already be underway to deal with the paradigm shift.

  • ?Financial aid season this year will begin on October 1, 2016 rather than January 1, 2017. The Federal Application for Federal Student Aid (FAFSA) will be available at that time and students can begin filing their aid applications a full three months earlier.
  • This means that many colleges and universities are preparing to start processing financial aid packages for both new and returning students in October. If you are not ready to begin packaging in October, you may be put at a competitive disadvantage.
  • The surveys I have reviewed, in combination with conversations amongst colleagues, across the country indicate that the majority of private colleges and universities plan to start packaging early. On the other hand, it appears that many public colleges and universities and some of the tier-one elite private institutions will not be prepared to change their
    financial aid timetables. This is likely to cause a great deal of confusion for students and families.
  • For colleges and universities interested in packaging early this cycle, Presidents should be contacting Board members so that Fall 2017 tuition and fees can be established no later than the end of September. This will be a big change for most institutions. Failure to establish final pricing in advance will make it impossible for financial aid offices to provide meaningful packages early in the year.
  • This is going to mean changes in the institutional budgeting cycle. In the past, leaders have been able to discuss, model and plan for the operating budget for the following year throughout the Fall term. Such discussions will now need to be held prior to the end of September. Chief financial officers will be making current year adjustments as a result of the final enrollments for Fall 2016, while completing the preliminary budgets for the 2017-2018 year.
  • Financial Aid Offices are going to need to prepare to use estimates for many state grant programs and possibly for the Federal Pell Grant. There is little indication of how the states are going to deal with the change. I have seen reports that the hope is that Federal Pell Grant eligibility tables will be available by October, but there are no guarantees.
  • Get ready for new terminology. While this change has been referred to as ?prior, prior year? for the last nine months or so, it seems the new term is ?Early FAFSA?.
  • The change in the cycle is going to allow more time for students and parents to negotiate their financial aid packages.
  • Differing responses by colleges and universities may mean that students and families will take longer to make their enrollment decisions as they
    review the early packages from some schools while waiting for the late packages from others.
  • It is going to be more difficult to predict yield rates for new students.
  • This may necessitate changes to the traditional recruitment cycle. For example, will it be wise to have admission counselors on the road during the Fall term when they may be needed to explain financial aid packages to admission applicants and encourage deposits?
  • Financial Aid leaders will need to be prepared for the new packaging timetable as traditional financial aid processes will need to be changed. The Fall term has traditionally been a time for planning, assessment and packaging new January students and completion of the Fiscal Operations Report. If new and returning students apply for financial aid in October, November and December it will add significant new workload to the traditional Fall term.
  • There are going to be more opportunities for professional judgments. The use of prior, prior year tax information may not reflect financial reality for many families. Count on more requests to base financial aid for Fall 2017 on 2016 tax returns.
  • If you have a financial aid deadline, now is the time to reconsider. You may also wish to reconsider any admission deadlines.
  • It is likely that the change will result in colleges and universities spending more institutional aid funds. While it is not always true, many families have increased incomes each year. The change might mean, on average, lower expected family contributions and slightly higher financial need.
  • You may wish to consider implementing new opportunities for payment plans that extend as long as eleven months before the beginning of the school year, thus lowering the monthly payment for many families.
  • It is important to meet with your IT professionals?on campus. Financial aid software vendors will need to be contacted to evaluate their preparedness for the new packaging schedule. It may also be necessary for programming changes with internal financial aid operating systems to occur much earlier. Where final updates cannot be made, temporary solutions will need to be identified.
  • For institutions that offer ?Early Decision? admission tracks the change will likely complicate that process.
  • Communication with both new and returning students is critical.

The Financial Aid Office will need to collaborate with the marketing professionals to design a systematic communication plan for new and returning students and their families.

Changes will need to be made to the website and institutional publications.

  • Additional training for admission counselors and academic advisors will be necessary.

It is impossible to predict how the implementation of Early FAFSA is going to affect colleges and universities. It seems clear, however, that having school-wide discussions now and developing an action plan to deal with the changes can mitigate the impact.

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