For all the benefit Prior Prior Year or PPY was supposed to provide parents and students, there are sizable downsides as well. The Free Application for Federal Student Aid or FAFSA is presenting some challenges especially for families in the following circumstances:
1. Parents who filed taxes in 2015 and are now no longer married or are now married to another person
and
2. Parents whose income is appreciably less in 2016 than it was in 2015.
The first situation is fairly easy to reconcile. When the parent the student lives with the majority of the year, known as the custodial parent, files the FAFSA, they do not use the Internal Revenue Services Data Retrieval Tool or IRS DRT. The IRS DRT “fetches” parent and student tax information directly from the IRS and transfers it to the FAFSA. In this situation, the parent would manually enter the amount or share of their income they earned and omit the non custodial parents (their ex spouse) or NCP.
If the custodial parent has remarried, they would still remove the ex spouses income but would add their new spouses income. In this case the IRS DRT would not be used, either.
Whenever the IRS DRT isn’t utilized it will often prompt the college to require a tax transcript from the custodial parent. Getting one from the IRS is relatively easy and can be done online.
The second situation occurs when a family’s income has dropped significantly since their 2015 taxes were filed. Parents are still required to file the FAFSA using 2015 tax information and should use the IRS DRT to report their true tax figures. Quite naturally parents are concerned their financial situation will be mischaracterized leading them to shoulder more of the cost of college than they would if their current income were to be reported.
When a parents income is less than 10% of what is reported on their 2015 return they should contact the financial aid office at the respective institutions for guidance. Some colleges have forms for this purpose while others ask that you send a letter or email detailing the circumstances. No matter the method, documentation is key. As always, when approaching financial aid, parents should first say what happened, how does it affect their ability to pay, what they are doing to improve their situation and finally, how much aid will they need to send their child to that college.