FAFSA changes

FAFSA changes passed by Congress

 

The COVID relief bill passed at the end of 2020 also included some significant changes to the FAFSA.

While the changes do not go into effect until the 2024-25 school year, that year’s FAFSA will use tax information from 2022, so there are nearer-term considerations. And because the FAFSA is completed each year a student is in college, it affects all families with students in college, not just those starting college, in 2024 and beyond.

Here is a summary of some of the major FAFSA changes:

 

Expected Family Contribution (EFC) changed to Student Aid Index (SAI)

Previously, when a family completed the FAFSA, it was given a remarkably misleading number called the Expected Family Contribution (EFC). Because of the name, families thought this number was what they would need to pay for college, when actually it was only a measure of a family’s financial strength. What a family actually pays for college is determined by each individual college’s financial aid policy.

Nothing fundamentally changes with the name change to Student Aid Index (SAI), other than it should be less confusing to families.

 

Negative value Student Aid Index

While the renaming of Expected Family Contribution to Student Aid Index doesn’t benefit families monetarily, a more substantive change is that it is now possible for families to have as low as a $-1,500 SAI (a negative value). Previously, the lowest possible EFC was $0. Depending on each individual college’s financial aid policy, this could benefit very low-income families as they may be able to receive financial aid above the cost of attendance.

Divorced parents completing the FAFSA

Previously, when parents were divorced, the parent with whom the student lived with the majority of the time completed the FAFSA (and the other biological parent did not). That has now changed to which parent provides more financial support, regardless of where the child lives the majority of the time.

According to Mark Kantrowitz, current guidance issued by the U.S. Department of Education indicates that the parent with greater income is responsible for completing the FAFSA when both parents provide equal financial support to the student.

 

Treatment of child support

The revised FAFSA treats child support received more favorably as an asset, as opposed to untaxed income, which is how it has been treated. Parental income can be assessed at up to 47 percent, while parental assets are assessed at 5.64 percent.

Reduced benefit for having multiple students in college

FAFSA will no longer divide the parent assessment by the number of family members in college, according to Kantrowitz, which will significantly reduce the amount of financial aid for middle- and high-income families who have multiple family members enrolled in college at the same time. It will not affect low-income applicants who already have a zero student aid index

Pell Grant changes

The Pell Grant program is designed to help college be more affordable to lower-income students, and formula changes on the revised FAFSA will allow more to qualify. Students will now be able to determine eligibility for Pell Grants based on a lookup table without first having to complete the FAFSA. The changes make it easier for single parents to qualify for the maximum amount, and incarcerated students will once again be eligible.

Elimination of questions

A major goal of the new legislation was to simplify the FAFSA so more families would fill it out.  The form has been reduced from 108 questions to under 40, including the elimination of questions asking about prior drug convictions and another requiring male students to register for Selective Service.

 

Financial aid appeals

According to Kantrowitz, colleges may no longer have a policy of denying all financial aid appeals, which is a very positive change for families. There are other changes to the professional judgment policy for college financial aid administrators that appear to give them more flexibility in awarding need-based financial aid for families.

 

*This article was updated on June 17, 2021, to reflect the announced one year delay in implementation of the changes to the 2024-25 school year, due to the complexity of overhauling the entire system. The previous version had the changes occurring for the 2023-24 school year.

1 Comment

  1. Kris May on February 7, 2021 at 7:04 pm

    The multiple kids in college allowance change is ridiculous!

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