The Free Application for Federal Student Aid (FAFSA®) for the 2025-2026 school year is now available to be completed online. This is astonishing as a few years ago, an applicant could not even prepare their FAFSA® application until after both the student and parents completed their income tax returns as this information was required to be entered into the FAFSA® application. The FAFSA® for the 2025-2026 school year uses the 2023 tax return information, not the 2024 tax year. The deadline for the FAFSA® is typically the date that your college requires correct and complete information, or by the last day of enrollment in the 2025-2026 school year, which may be June 30. However, you may need to fill out the FAFSA® earlier in order to complete your state financial aid application as the state application uses the information transferred over from your completed FAFSA®.
This is the eighth consecutive year in which I have completed FAFSA® information for my kids’ college education, so from prior experience, I mentally set aside two hours to complete the application. Surprisingly, I completed both the student and parent information in less than 20 minutes! As a FAFSA® applicant from prior years, nearly all information was already completed. I just had to confirm that the answers were still accurate.
For the student to be eligible for federal aid, you must answer AND provide consent. The consent process was simple, I just had to select “Approve.” This allowed FAFSA® to import my federal tax information directly from the IRS. FAFSA® stresses that both answers AND Consent are required, even if you enter the tax information yourself, or the student will NOT qualify for financial aid; I assume FAFSA® needs to compare and match to filed tax returns to qualify. There were a few questions that needed to be answered such as those regarding any taxable scholarships, possible financial support from their parents, and whether or not the student was an orphan etc. In previous years, applicants were required either to manually enter line by line tax information, or connect through a secure link with the IRS.
The FAFSA® website was also updated to provide Q&A and step-by-step webinars before starting the application for those who seek further assistance.
Be sure to go back to check the status of your application a few days later to be sure it was completed and fully approved by FAFSA®, otherwise your student might try to start classes and learn that federal loans or grants have not even been received by the college.
Previously, distributions from a grandparent owned 529 plan—or any other source of money from any person who is not the student or the student’s parent who is listed on the FAFSA® application—were reported as though the student must have earned the money, or as other untaxed student income. This reduced aid for next years’ eligibility by up to 50% of the distribution amount. Given this old rule, grandparent funds were saved and held back until the student’s senior year to avoid being penalized in the following year. However, starting with the 2024-2025 FAFSA®, students’ incomes are determined by their tax returns only, rather than also considering other sources of payments as student earned income, such as from a grandparent. Thus, these other financial sources no longer impact financial aid eligibility.
Effective September 5, 2024, New York State Law was amended to include distributions for Qualified Loan Repayments and Qualified Roth IRA Rollovers as New York Qualified Withdrawals.
Refer to my insights post "Strategies for an Overfunded 529 College Savings Account" dated December 18, 2023.
In other words, New York matched the federal regulations so that such distributions which meet the definition of a qualified transaction for federal purposes will also meet the requirements under the NYS College Choice Tuition Savings Program, meaning that these distributions should no longer have a tax impact in New York.
After you complete your FAFSA®, you still need to go to the New York State Higher Education Services Corporation (HESC) website to apply for the Tuition Assistance Program (TAP) award. The deadline for the TAP application is June 30 of the academic year in which the grant is sought.
The TAP application process has not changed since last year. The information from the student’s and parents’ 2023 tax return needs to be entered by the applicant. The applicant must then review the answers, and print a copy for their records. Even still, the whole process from log in to application submission took me about 15 minutes. Again, go back a few days later to be sure your TAP application has been approved.