As the new year begins, looking a bit at the federal financial aid scene may be helpful.
As always, the primary concern in Washington is with the Pell Grant program. All other federal aid programs are secondary. One of the current Pell issues is something called “prior prior” year. Historically, aid eligibility for a given school year is based on the most recently completed calendar year, e.g. 2014-15 aid is based on 2013 family income. In the eyes of some members of Congress, however, waiting until after January 1 to apply for aid is too late in encouraging some students to look at college. If we were to use the “prior prior” year, 2012 could be used to let students apply much earlier. It also would dovetail with federal efforts to tie FAFSA income with IRS submissions, something which is currently problematic as many FAFSA filers do so before 1040 completion. There are, of course, some significant shortcomings with this approach, such as 2013 income being dramatically lower than 2012. In any event, it is something to monitor.
Recent federal focus is also on the federal PLUS (Parents’ Loan) program, which allows credit-worthy parents to borrow the difference between the student’s cost of education and other aid being received. The credit test, which is generally much more liberal than that used for other consumer loans, was tightened somewhat last year and resulted in some parents’ being cut off from eligibility. The Department of Education then backtracked and approved most of those who asked for another review. Nonetheless, there is still much worry about how far into debt some families are going. Again, something to watch.
See you next time.