The new “prior-prior year” policy and its impact on college student recruitment and awarding

The federal government has ruled that, starting in fall 2016, students may apply for federal student aid based on their family’s income from two years earlier rather than the previous year—often referred to as the “prior-prior year.” This new policy will impact students seeking financial aid for the 2017-18 academic year.

Under this approach, students would not have to wait until January 1 of their senior year to complete the FAFSA. Instead, students could apply in the fall of their senior year when they apply for admission using income information from their most-recently completed tax return. This would mean a student applying for admission for fall 2017 would be using parental income data from 2015.

The benefit to families is obvious: receiving their awards earlier in their senior year would provide admitted students with more transparency about cost and also allow them more time to make tuition payment arrangements. Given the momentum this approach has gathered, colleges and universities would be wise to begin to consider how it will affect them. Here are some initial considerations:

• Budget planning: For many private universities, tuition is finalized in the spring for the coming fall. In order to award students in the fall for the following fall, the budget planning process may have to be moved up to allow time to update cost information in marketing materials, the website, and award packages.
• Affordability messaging: If admissions and financial aid calendars were more aligned as a result of this change, colleges would have less time in the senior year to market their value proposition with strong ROI and brand messaging. If the financial aid package is presented without those complementary messages, families may be quick to cross your institution off their list. That means that value messages must be communicated earlier in the process, when students are sophomores or juniors in high school.
• Recruitment planning: Historically, the heaviest travel takes place in the fall with counselors hitting the road for their annual circuits of college fairs and high school visits. If financial aid awarding occurs earlier, critical recruitment processes may have to be adjusted as well. For example, fall campus visit events may need to include time for financial aid counseling and using spring travel to communicate the value proposition may become more important.
• Processing of aid applications: The opportunity for families to submit FAFSAs earlier means aid offices will have to be prepared to award aid earlier in order to remain competitive. This may also require more early estimates of state and federal aid awards than institutions are used to.
• Appeals: With more time between receiving an aid award and the deadline for enrollment decisions, will more families appeal their students’ awards? Maybe, but it is possible the number of appeals will just be spread out across more time. In any event, be prepared for an earlier start on appeal season. More aid offices will be receiving appeals before they have a clear idea of how the entering class is shaping up. This argues strongly for having in place a set of awarding policies designed to support institutional enrollment goals so that you can make your first offer your best offer. It may also be important to clearly establish a timeline for responding to appeals that will enable you to hold off on responding to early appeals, until you’re in a better position to see what the enrollment and revenue picture is going to look like.

The prior-prior year option certainly has the possibility of benefiting families as they search for the right college. It also provides some significant advantages to institutions. For example, fewer families will likely require verification because they will be applying for aid using completed tax returns, rather than estimates. And aid offices will have longer to complete verification on those students who are required to provide additional materials. However, it is also important that college leadership begin to think about how this transition will impact recruitment and budget cycles as well as other operations.

What can you do to prepare for this change and award aid more strategically?

I am happy to discuss what you can do to address this development and also to assess your awarding process. Email me with your questions or if you would like to discuss your awarding strategy.