How the College Financial-Aid Process Will Be Different This Year

Summary

WSJ Your Money Briefing
Episode: How the College Financial-Aid Process Will Be Different This Year
Date: December 21, 2021
Host: J.R. Whalen
Guest: Cheryl Winokur Monk (WSJ Contributor)

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Episode Overview

This episode explores the changing landscape of college financial aid, focusing on the FAFSA (Free Application for Federal Student Aid) process and how both the pandemic and recent regulatory changes are impacting students and families applying for financial aid in the 2022-2023 school year. WSJ contributor Cheryl Winokur Monk provides practical advice, discusses rule changes, addresses potential pitfalls, and debunks financial aid scams currently circulating online.

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Key Discussion Points & Insights

FAFSA Participation Trends

Why are fewer students filling out the FAFSA?

• Participation in FAFSA applications has been declining—only 68% of undergraduate families filled it out in 2020-2021, according to Sallie Mae (“How America Pays for College”).
• Common misconceptions:
  • Families mistakenly believe they won’t qualify due to higher incomes.
  • Many don’t realize FAFSA is the gateway to federal grants, work-study, and loans.
• Notable Quote:

  “A recent poll from LendingTree's Student Loan Hero Unit found that 85% of undergrads didn't even know that FAFSA determines eligibility for things like grants and work-study in addition to loans.” (Cheryl Winokur Monk, 02:21)

What FAFSA Unlocks

• The FAFSA determines eligibility for:
  • Federal Pell Grants (need-based),
  • Student loans,
  • Federal work-study programs,
  • Most state and school-based aid,
  • Some private scholarships.

The Pandemic’s Impact on Aid Calculations

Which year’s income matters?

• FAFSA for 2022-23 uses 2020 tax returns (“prior-prior year”).
• Pandemic-related income anomalies (job loss, health expenses) may not show up on those returns.

If your financial circumstances have changed:

• Proactively contact each school’s financial aid office to explain your current, atypical situation and request a review.
• Notable Quote:

  “If you have these anomalies or things that you really think the aid officer should know, that's not reflected on your tax returns, you really need to reach out.” (Cheryl Winokur Monk, 03:38)

• Each institution handles these reviews differently; outreach must be done separately for each school.

Unemployment & Adjusted Gross Income (AGI)

• Special note for families who collected unemployment:
  • If 2020 taxes were filed before Congress excluded some unemployment benefits from taxable income, AGI may appear inflated.
  • Request a reassessment with prospective schools if this applies.
• Notable Quote:

  “If the parent or parents collected unemployment... before Congress changed the rules... that's when they're going to want to ask their student school or prospective schools if the aid award can be adjusted favorably.” (Cheryl Winokur Monk, 04:55)

Recent Rule Changes

• Selective Service:
  • Male students no longer need to register for selective service to qualify for federal aid.
• Drug Convictions:
  • Drug convictions no longer affect federal financial aid eligibility.

Financial Aid Scams & Fraud

“Gaming the system” advice on social media:

• Fraudulent tactics (strongly discouraged and illegal):

  • Fake marriages to be classified as “independent” and exclude parent income.
  • Transferring guardianship to a lower-income relative/friend for more aid.

• Notable Quote:

  “Getting married just for the purposes of getting financial aid is fraud. And this fraud if you're caught is punishable by potentially jail time and large fines. So it's really not something you want to do.” (Cheryl Winokur Monk, 06:17)

• The Department of Education investigates and penalizes such cases.

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Notable Quotes & Memorable Moments

• On declining FAFSA completion rates:

  “Only 68% of families with undergraduate students completed the FAFSA... and that's a decline from the prior two years.” (Cheryl Winokur Monk, 02:12)

• On COVID-19’s unique expenses:

  “In some cases, a family due to the pandemic may have had extraordinary health expenses or a job loss. And those types of things may not be apparent from that 2020 tax return.” (Cheryl Winokur Monk, 03:32)

• On rule changes benefiting students:

  “Males no longer have to register with a selective service system in order to be eligible for federal financial aid. In addition, if you have a drug conviction, it's not going to affect your ability to seek financial aid.” (Cheryl Winokur Monk, 05:29)

• On scams:

  “There really are people out there who try to game the system... encouraging people to get married for the purpose of being considered an independent student... It's fraud.” (Cheryl Winokur Monk, 06:12)

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Timestamps for Important Segments

• [02:10] – FAFSA participation decline and misconceptions
• [02:51] – What aid the FAFSA enables
• [03:25] – The effect of the pandemic on the aid process
• [03:38] – Guidance for families with unusual financial situations
• [04:53] – How unemployment benefits and AGI might affect aid, and what to do if affected
• [05:26] – Recent eligibility rule changes (Selective Service, drug convictions)
• [05:48] – Explanation and warning about financial aid scams

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Summary

Families applying for college aid in 2022-23 should be aware of updated FAFSA rules, pandemic-related anomalies in their financial records, and new changes to eligibility requirements. Misunderstandings about financial aid persist, with many missing out due to false assumptions about eligibility. If your financial situation changed significantly during the pandemic, direct communication with each school’s aid office is essential. Be wary of “tips” encouraging fraud—these carry serious legal consequences. Overall, staying informed and honest is key to successfully navigating this year’s financial-aid process.

Transcript

[A]

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[B]

Here's your money briefing for Tuesday, December 21st. I'm J.R. whalen for the Wall Street Journal. A college education is among a family's largest expenses. And to ease the financial burden, millions of high school students and their families are filling out the Free Application for Federal Student Aid, or fafsa. But this year, families should prepare for a bit of extra number crunching because of the pandemic's continued impact on their finances.

[A]

In some cases, a family due to the pandemic may have had extraordinary health expenses or a job loss. And those types of things may not be apparent from that 2020 tax return. So if you have these anomalies or things that really you think the aid officer should know, that's not reflected on your tax, you really need to reach out.

[B]

Coming up, we'll talk with WSJ contributor Cheryl Winokur Monk about some changes in the aid application process. That's after the break.

[A]

Deal replaces fragmented payroll vendors with one global system. No third parties hire, manage and pay teams in 150 plus countries operate like a local everywhere. Visit d eel.com WSJ.

[B]

Ahead of next year's school year, students that are preparing for college are completing the Free Application for Federal Student Aid, or fafsa. But there are some rule changes in the impact of the pandemic on families personal finances that can affect a student's potential financial aid. WSJ contributor Cheryl Winokur Monk is our go to resource for issues that families need to be aware of as they prepare to tackle the cost of a college education. And she's with me now to discuss. Cheryl, thanks so much for being here.

[A]

Thanks for having me.

[B]

So Cheryl, you've been on with us before talking about how the number of students who fill out the FAFSA has been on the decline. Why is that and is that still going on?

[A]

It's definitely been on the decline. Only 68% of families with undergraduate students completed the FAFSA, and that's for academic year 2020 and 2021, and that's a decline from the prior two years according to Sallie Mae's How America Pays for College. So there's lots of reasons families may not fill out the fafsa. They may think they're not going to get money. They think they may make too much money, for example. But a recent poll from LendingTree's Student Loan Hero Unit found that 85% of undergrads didn't even know that FAFSA determines eligibility for things like grants and work study in addition to loans. So it's a combination of reasons. They're not filling it out now.

[B]

I wanted to ask you just to refresh us a bit on the kinds of benefits that are available through the fafsa.

[A]

So it's really the entry point to getting any kind of federal aid. So a Pell Grant, for example, if you're eligible, student loans and federal work study, which allows you to earn money and get paid for it and help defray the cost of college, you often have to fill out the FAFSA in order to be eligible for state aid as well, as well as school based aid and even some scholarships.

[B]

Now, students and families are filling out the FAFSA now for the 2022, 23 school year. But how could the economic impact of the pandemic affect the financial aid that a student could receive?

[A]

So it can get a little confusing, but the tax return, the tax information you're using is the prior prior year. So again, that's confusing to people. But people use their 2020 tax return for purposes of getting aid for the upcoming academic year, the one that's gonna start in September. So in some cases, people had really great 2000s. Right? But if that's out of the ordinary, you would wanna let councilors know, because maybe if you had an exceptional year for whatever actually did really well during the pandemic, but if that's not normal, then you need to let aid counselors know that that's not the typical, so that you can be considered under a different kind of level. For example, in some cases, a family due to the pandemic may have had extraordinary health expenses or a job loss. And those types of things may not be apparent from that 2020 tax return. So if you have these anomalies or things that are that really you think the aid officer should know, that's not reflected on your tax returns. You really reach out. And just one word of caution. If you're a prospective student, so you're not already in school, you're going to have to reach out to the financial aid office for every school you're applying to, because every school determines its packages differently.

[B]

Now, I want to ask you about job losses. Specifically, during the height of the pandemic, tens of millions of people lost their jobs. And so if a parent collected unemployment due to the pandemic, could that affect the amount of aid that a student could receive.

[A]

So it's not going to affect everybody. But if the parent or parents collected unemployment due to the pandemic and filed their 2020 taxes before Congress changed the rules that would allow them to keep some of that income out of their adjusted gross income, that's when they're going to want to ask their student school or prospective schools, if you're not already at a school, if the award aid award can be adjusted favorably. So it's not going to affect everybody, but it could affect a subset of people.

[B]

Any other rule changes that have gone into effect that families should keep in mind?

[A]

There are two things that you should consider or know about is that males no longer have to register with a selective service system in order to be eligible for federal financial aid. In addition, if you have a drug conviction, it's not going to affect your ability to seek financial aid.

[B]

You know, there's been some social media chatter about scams and fraud as a way to get more financial aid. Can you tell us more about that?

[A]

It's actually kind of crazy, but there really are people out there who try to game the system and encouraging others to do the same on social media. So one of the ways that that's being played up on social media is encouraging people to get married for the purpose of being considered an independent student. So there's differences when you're independent or dependent student. As an independent student, your parents finances aren't considered. So if you have no income or very little income as an independent student, you're not relying on your parents to. Now the problem with doing this, getting married just for the purposes of getting financial aid is it's fraud. And this fraud if you're caught is punishable by potentially jail time and large fines. So it's really not something you want to do. I mean it's one thing to say on social media I did this, I did this and I even read an article about people doing this and thinking they could get away with it. But it's really, really, it's fraud. Another way that people may be trying to game the system is, is to transfer legal guardianship of a college bound child to say a relative or a friend who are less well off. And then that way the teen would be able to get more financial aid than if the guardian of the parent who may be very well off. But this too is fraud and they've definitely, you know, the education department has definitely gone after people or certainly looked into cases of this happening. And it's really bad practice to try and game the system all right.

[B]

That's Wall Street Journal contributor Cheryl Winokur. Monk. Cheryl, thanks so much for being with us.

[A]

Thanks for having me.

[B]

And that's your Money briefing. I'm J.R. whalen for the Wall Street Journal.

[A]

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