FAFSA error means less financial aid for families

The new, redesigned FAFSA that will launch by the end of 2023 has a calculation error that will result in most families qualifying for less financial aid than lawmakers intended.

The legislation that drove the FAFSA overhaul called for an increase to the amount of income that was shielded from the FAFSA calculation, otherwise known as the income protection allowance. According to the Washington Post, the amount of income protected for parents was supposed to increase by 20 percent, 35 percent for dependent students and almost 60 percent for students with children of their own, and those numbers are to be adjusted annually for inflation.

However, the department of education didn’t make those adjustments on the new form. To make matters worse, the percentages were supposed to be calculated using the consumer price index from the past three years — a period of record-high inflation.

According to the Post, the Education Department said it is unable to make the proper corrections now because of timing and data constraints but will make updates for the 2025-2026 school year. The new FAFSA with this error is for the 2024-2025 school year.

The FAFSA formula takes parent income and assets, and student income and assets, and calculates a figure called the Student Aid Index (SAI) that colleges and the government use to award financial aid, including grants and scholarships that do not need to be repaid.

The calculation error will produce a higher SAI than a family should have, which will result in lower aid eligibility.

That is because the current tables will produce an artificially high Student Aid Index, or SAI — a figure used to determine a student’s ability to pay for college and a replacement for the Expected Family Contribution. The higher the SAI, the lower the aid eligibility.

According to the Post, Bryce McKibben, the senior director of policy and advocacy at the Hope Center at Temple University, estimates that “dependent students and their families will see anywhere from $6,000 to more than $10,000 of additional income considered in their calculation, depending on the size of their families. A single parent enrolled in college with one child, according to McKibben, will have more than $8,000 of income factored in when it should not be considered.”

The SAI also determines eligibility for work study and federal subsidized loans, so there will be families who will qualify for less, or miss those opportunities, because of their inflated and incorrect number.

It will be interesting to see if and how colleges respond to this FAFSA error, and whether families will have opportunities to appeal their financial aid awards as a result.