Federal update

FAFSA “Simplification?”

The big news regarding the FAFSA Simplification Act is that the U.S. Department of Education has announced we won’t get the new FAFSA form until this December. That’s important because it will affect just about every student at SCICU’s 21 member colleges and universities. Families, and financial aid officers, won’t be able to start figuring out how much college will cost students until then.

The other big news is it’s become clear that the simplification is going to be pretty complicated. Yes, there will be fewer questions and the process for calculating aid will be streamlined, but the impact on students and families will vary widely.

One of the big changes will be that the term for the estimate of how much a family can afford to pay will change from “Expected Family Contribution” (EFC) to “Student Aid Index (SAI).” A reason for the change boils down to semantics: “Expected Family Contribution” was thought to suggest all the funds that students have to come up with, when they often pay more than the EFC. Beyond terminology, just how the SAI is calculated will change. Let’s treat these changes as good news and bad news:

The Good News

The maximum Pell Grant will increase for the 2023-24 academic year to $7,395 from $6,895. That will reduce a student’s SAI.
The parent’s Income Protection Allowance (IPA) will increase depending on family composition. For example the IPA for a family of four with one child in college will increase to $35,870 from $30,190. Again, that will reduce the student’s SAI.
A student’s SAI can be negative. Since the student’s and parents’ earnings are added together, a negative score for the student will reduce the assessment of the parent’s ability to pay. In fact, when added together, the total may be a negative number. The negative SAI will allow institutions to target their own grant and institutional aid programs to students most in need of assistance.
Qualifying for the maximum Pell Grant will be simpler. Students whose family income is below a certain level will not need to provide asset information on the FAFSA form, making it that much easier to fill out. And beginning with the 2024-2025 academic year, more students will automatically qualify for the maximum Pell Grant because of an increase in the poverty threshold for family income.
Income information will be automatically uploaded. Thanks to the “Fostering Undergraduate Talent by Unlocking Resources for Education” (FUTURE) Act of 2019 the IRS can share income information directly with the Department of Education, eliminating the need for students and families to make those income calculations. There is an opt-in provision, so students and families can select to include the information themselves.

The Bad News

The “sibling discount” is eliminated. Students with families that have more than one child in college get their EFC reduced proportionally, i.e. if there are two children in college their EFCs are cut in half; three and they’re cut by one-third. The SAI includes no such accommodation which may cost families with more than one child in college a considerable amount of money.
Assets of farmers and small business owners are included in the SAI calculation. With those assets included those families will appear “richer,” which may impact their Pell eligibility.

This quick overview is itself a simplification. I leaned on a very thorough Brookings Institution report, “The Complication With FAFSA Simplification,” and suggest it for anyone interested in a deeper dive.

And, please, urge families – particularly those with students already in college – to start the FAFSA process as soon as they can. The impact of “simplification” will depend on a multitude of factors, and as they say in commercials, “results may vary.”