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Feds push diversity in financial aid

(MoneyWatch) A federal financial aid loophole will be closing soon.

The U.S. Department of Education recently announced changes to the federal financial aid application, the form that students must complete to get financial assistance for college, that will require the collection of income figures and other information from nontraditional families for the first time. Beginning with the 2014-15 school year, same-sex couples and unmarried parents who live together will be required to complete the Free Application for Federal Student Aid.

Historically, the FAFSA has required data only from both parents of a dependent student if they are married. If the parents are divorced, only the parent considered the custodial parent must complete the FAFSA. So if the custodial parent is a teacher and the ex-spouse is a physician, the income of the high-earning doctor is never shared on the financial aid form. That provision will remain. 

What will change is the ability for a unmarried parents to live together and avoid sharing a complete picture of their finances on the FAFSA. Currently, only one parent in this living arrangement has to share information on the FAFSA, but beginning next year both parents will be required to do so.

Even though the federal government does not legally recognize same-sex couples due to the controversial Defense of Marriage Act, the new financial aid rule will also apply to same-sex couples. Rather than requesting information on the form for a mother and father, it will request information from parent No. 1 and parent No. 2.

"All students should be able to apply for federal student aid within a system that incorporates their unique family dynamics," said U.S Secretary of Education Arne Duncan in a statement. "These changes will allow us to more precisely calculate federal student aid eligibility based on what a student's whole family is able to contribute and ensure taxpayer dollars are better targeted toward those students who have the most need, as well as provide an inclusive form that reflects that diversity of American families."

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