Five college financing updates all students and parents should know about
It鈥檚 college application season,聽and聽the reality of how much that degree聽will cost is hitting families across the country聽鈥� even those who have been preparing for years. But聽changes to how families fill out聽the FAFSA, along with new ways to decide what colleges they聽can afford, might help make the process a little easier.
Whether you鈥檙e a student or a parent, make sure you understand these five important updates聽so you鈥檙e prepared to make the best financial decision for you when college acceptances come in.
1. Two major FAFSA changes streamline the financial aid process
On Sept. 13 the White House聽聽that, starting next year, students and parents can fill out the Free Application for Federal Student Aid (FAFSA) three months earlier than previously allowed. The form will be available in October 2016 for the 2017-18 school year, instead of in January 2017. Students will also be able to enter their parents鈥� income information from two years preceding the year they apply for college (called the 鈥減rior, prior year鈥�) instead of just one year.
Why is this a big deal? High school seniors apply for college between October and December, but as it stands they don鈥檛 see their Expected Family Contribution 鈥� a determinant of how much financial聽aid they can receive 鈥� until the FAFSA is available the following January. And since many families haven鈥檛 done their taxes by then, they鈥檙e using estimated income information that they鈥檒l have to update later. It might turn out they applied to schools they ultimately cannot afford.
Once the change goes into effect, a student who completes college applications in the fall can at the same time聽聽and, since they can go back two years, use the聽聽to instantly fill in their parents鈥� accurate income information. Now the student can see how much the government expects their family to pay for college 鈥� and decide which colleges to apply to based on more realistic figures.
2. The U.S. Department of Education revamps聽its College Scorecard
After two years聽of buildup,聽the federal government on聽Sept. 12 launched its redesigned聽,聽a聽tool that allows students and parents to compare costs, academics, employment outcomes and graduation rates at more than 7,000 schools.
It鈥檚 an update to the College Scorecard the White House聽聽in February 2013. It鈥檚 also a shift聽away from聽the government-powered college ratings聽system that President Obama聽聽two years ago, to strong criticism.
Instead, the redesigned tool is聽聽that allows prospective students聽to search schools by name or by characteristics聽such as聽location, size or聽degree options. Users聽can also view school-specific聽information on the聽average annual cost by family income and the typical monthly student loan payment after graduation.
True cost data like this can help students聽decide as early as possible if the schools聽they鈥檙e interested in will leave聽them with unmanageable student loan debt.
3. Pell Abacus offers college price estimates聽for Pell Grant-eligible students
The Department of Education has also partnered with college research website聽College Abacus to integrate College Scorecard data into another useful tool. Released on Sept. 28,聽聽shows聽high school students who currently qualify for free or reduced-price lunch 鈥� and who would likely be eligible for federal聽聽for college 鈥斅爃ow much they鈥檒l pay out-of-pocket at聽more than 5,000 colleges.
Pell Abacus estimates the net price of each school, or the cost to the student聽after taking into account grants, scholarships and other aid that doesn鈥檛 need to be paid back.聽In other words, the financial aid Pell Abacus calculates doesn鈥檛 include federal student loans.
The tool takes less than five minutes to use, requiring students to answer just a few questions about the size of their family, their parents鈥� marital status and whether they plan to live on- or off-campus. Students don鈥檛 need to know their parents鈥� income or tax information, which means it鈥檚 an easy way to get a realistic sense of college expenses before applying or accepting an offer of admission.
4. PwC聽announces it will help employees pay off their student loans
While聽it鈥檚 a smart idea to聽avoid student loans if you can, many students can鈥檛 afford college without them. In fact, almost聽41 million grads are currently repaying student loans, according to Federal Student Aid. To attract recent graduates who might have聽years of payments ahead of them,聽auditing and consulting firm PricewaterhouseCoopers announced on Sept. 30 that, starting next year, it will聽聽to help entry-level employees聽pay off their聽student loans.
鈥淎s a firm that recruits more than 11,000 new hires off campus each year, this is an opportunity to differentiate ourselves with a key talent group 鈥� millennials 鈥� and provide a meaningful way to help reduce their debt,鈥澛燭om Codd, vice chairman聽and聽U.S. human capital leader聽at聽PwC, said in a press release.
About 3% of companies currently offer student loan repayment assistance, according to a June 2015聽. PwC is one of the聽largest U.S. companies to provide聽this benefit to employees. Boston-based startup聽Gradifi聽will process PwC鈥檚 contributions to employees鈥� student loans, and additional companies聽can sign up for聽Gradifi鈥檚 service starting next year.
Keep in mind, too, that if you work for the government or聽at a nonprofit, you聽always have the opportunity to have your federal聽loans forgiven after 10 years through the government鈥檚聽听辫谤辞驳谤补尘.
5. CFPB report says student loan servicers miss the mark
This summer the Consumer Financial Protection Bureau collected more than 30,000 public comments from student loan borrowers who reported issues聽with their聽, the companies that manage borrowers鈥櫬爁ederal loans. The CFPB聽聽Sept. 29 outlining those borrowers鈥� concerns and proposing聽how to improve servicers鈥� practices.
Many borrowers聽told the CFPB their servicers provided聽poor聽payment processing, customer service and education聽about聽income-driven聽repayment plans. Some said an unexpected change to their servicer聽also resulted in incorrect loan聽balance and payment information.
To fix聽these issues, the government聽recommended that state and federal agencies enforce聽consumer financial laws聽when servicers break them, and that policymakers create basic聽standards of conduct for all federal loan servicers to follow. The CFPB didn鈥檛 offer specifics聽about when these approaches would be taken up or go into effect.
Brianna McGurran is a staff writer at NerdWallet, a personal finance website. Email:bmcgurran@nerdwallet.com. Twitter:聽.
