Here's something student loan borrowers don't want to hear: The Equifax data breach now could cast a shadow on applying for some college loans, too.
After the Equifax data breach hit in early September, many consumer watchdogs —including the Federal Trade Commission and U.S. PIRG — advocated that consumers consider putting a freeze on their credit report if they felt their Social Security number and other data had been compromised.
But a credit freeze will mean that you won't be able to obtain a Federal Parent PLUS loan and a Federal Grad PLUS loan, said Mark Kantrowitz, publisher and vice president of strategy for Cappex.com.
Why? PLUS loans require reviewing a borrower's credit history. If you've frozen your credit reports, lenders don't have access to your information. The same would be true for taking out a new car loan or applying for a new credit card.
The good news — as FAFSA filing season began Oct. 1 — is that credit checks aren't part of the process for applying for other federal student loans and grants. So it's still important to get cracking on the FAFSA now.
What else do you need to know about the financial aid process?
What should you do if you need a PLUS loan?
A Parent PLUS loan — now fixed at 7% for loans dispersed between July 1, 2017, and June 30, 2018 — is taken out by parents who want to take on debt to bridge the gap left after savings, student loans, scholarships and other sources for covering the cost of college are exhausted.
If you initiated a credit freeze, unfreeze your credit before you apply for a Parent PLUS, meant for parents of dependent undergraduate students, or a Grad PLUS loan. Financial aid administrators note that many PLUS loans are processed in the fall and the spring.
Kantrowitz said the temporary release of the freeze needs to be in place before applying for the PLUS loans — and you should not re-initiate the freeze until you are notified that the application has been approved.
What about that other cyber attack involving FAFSA and the IRS data tool?
One of the bigger hacking stories in early 2017 involved FAFSA and the Internal Revenue Service Data Retrieval Tool that was designed to make it easier to access income tax information to file the application for federal student loans.
But crooks involved in tax-related ID fraud took shortcuts, too.
Fraudsters obtained enough information elsewhere to access the Free Application for Federal Student Aid form online, as one step in an elaborate scam involving filing fake tax returns to steal tax refund dollars. The IRS acknowledged "questionable use of the Data Retrieval Tool" by fraudsters via fafsa.gov and StudentLoans.gov.
As a result, the IRS suspended the online tool in early March. In April, the IRS mailed about 100,000 notifications to taxpayers who might be at risk for ID theft.
So far, the financial aid community has been told that all systems are going to have the tool back online by Oct. 1, according to Pam Fowler, executive director of financial aid at the University of Michigan in Ann Arbor, Mich.
As a result, parents and students should be able to use the IRS's Data Retrieval Tool to automatically fill in the FAFSA form online with tax information.
The IRS said the tool has been tweaked to help prevent ID theft.
For example, married couples who both earn paychecks will be able to use the data retrieval tool but they will need to take a few extra steps relating to their earnings. Married taxpayers who file a joint return will need to submit their earned income information from their W-2 forms manually, Kantrowitz said.
Families use tax information from 2016 to apply for financial aid for the 2018-19 school year. After you gather data, some estimate it can take less than an hour to file the FAFSA for most applicants.
Should I file the FAFSA soon?
Yes. You can begin filing the application for the 2018-19 school year as soon as Sunday. So if you're a senior in high school, you are filing an application for federal student aid before you've been accepted to many colleges.
The Oct. 1 kickoff was designed to give high school seniors more time to understand complicated financial aid offers from competing schools before the May 1 college decision day.
"Of course, the major reason to complete FAFSA early is so that it's done and you can cross it off the long list of things you need to do in your final year of high school," said Rick Shipman, executive director of financial aid at Michigan State University in East Lansing, Mich.
Last fall was the first time we saw the Oct. 1 kick off — which was about three months earlier than usual. And parents and students seemed jump into action.
By the end of December, MSU had received 34,490 FAFSAs for 2017-18.
"We found that families were taking advantage of the early filing capability in large numbers," Shipman said.
"Any FAFSA we received early for an admitted student was processed early too."
Do you have to file the FAFSA in early October?
No. But the earlier you file, the better in many cases. Some financial aid is awarded on a first-come, first-served basis.
Shipman said MSU does not have a FAFSA filing deadline but the university does have gift aid programs with limited funds, including federal, institutional and endowment funds. And only students who file the FAFSA early are considered for those limited awards.
Technically, the FAFSA deadline for the 2018-19 school year is June 30, 2019. But again, you still want to file much earlier than any of those dates if possible because some programs and schools have limited funds.
Remember, there is no cost for filing FAFSA. But you do need to re-apply each year for federal student loans and other aid.
Contact Susan Tompor: firstname.lastname@example.org or 313-222-8876. Follow her on Twitter @Tompor.