Big (and Not So Big) Changes Coming to a FAFSA Near You

Student Aid Index

Big (and Not So Big) Changes Coming to a FAFSA Near You

Published January 22, 2021

Student Aid Index

Whether you’re the type to complete the Free Application for Federal Student Aid (FAFSA) in a weekend or take it to your financial advisor, this one document determines how much aid your child gets from the government, and how much need-based aid they are likely to get from their college.

Recently, Congress voted to update the form, in no small part due to the difficulties that families have faced during the COVID-19 pandemic. 

While the changes won’t take effect until the 2024 – 2025 school term, any student currently applying to college, and many now enrolled, will eventually complete the new FAFSA.

Updated FAFSA’s Basic Changes 

The updated FAFSA is designed to address a number of issues that students (and their families), as well as colleges have faced with the current formulation.

Bringing the document into the 21st century required a number of shifts.

First, and perhaps most notable, is that the Expected Family Contribution (EFC) is no more.

Student Aid Index

Instead, the FAFSA’s EFC is being replaced by the Student Aid Index (SAI).

This number will help colleges better understand families’ needs, while also enabling financial aid officers to better articulate aid packages to families.

For some time, the EFC has been a bit of a misnomer, with many families assuming it is the amount they are expected to pay for their child’s college education. However, that is not always the case.

The shift to the SAI will attempt to remove that confusion.

Whereas the EFC can go no lower than zero, thus limiting the aid that colleges could provide students, the SAI can be a negative number. This is one of the biggest changes to the financial aid process, as it will allow for students to receive aid in excess of their institution’s Cost of Attendance. Such a decision allows for students to receive more substantial aid for living expenses.

Living Expenses

The focus on recognizing the other costs of higher education is shown in the reclassification of other expenses, especially room and board.

Currently, students who chose to live at home are not given an allowance for housing from their financial aid departments.

That will no longer be the case, as students will now be eligible to receive aid to offset the expense of staying with family. 

In fact, housing expenses will now be classified across six different categories, including living on-campus, living with family, and living on a military base.

Further, on-campus housing allowances must be based on either the median or average cost, whichever is higher, providing a more accurate number.

Meal plans also receive extra scrutiny from the new FAFSA process.

Financial aid calculations must now include meal plans that include three meals per day, so colleges cannot base financial aid on meal plans that offer only a brunch and dinner option.

Changes in Filing the FAFSA

There should be no surprise that there are changes coming in actually filing the FAFSA.

Many of these have been aimed at making the process easier, as well as getting a better picture of the student’s financial resources.

Streamlined for Lower-Income Earners

The entire process has been simplified: what once required more than 100 questions will now be less than 40 in most cases.

Much of the information for those questions will be pre-populated using parents’ tax returns as a result of the Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE) Act, meaning that families will no longer self-report income.

The new FAFSA will make the process of applying for aid more accessible to those whose families have an Adjusted Gross Income (AGI) of less than $60,000 per year.

The changes will see more Pell Grants awarded, especially to those with incomes of less than $40,000 per year, according to the NASFAA (National Association of Financial Aid Administrators).

Assets owned by a student will be examined in a more favorable way, especially if the student’s family has an income of less than $60,000, or if they already qualify for a full Pell Grant.

Finally, parents’ assets will be further protected from the assumption that they can be used to pay for college expenses.

For example, child support will no longer be taken into consideration.

On the other hand, some assets that belong to families making above $60,000 per year, will be viewed as available resources for paying for college, excluding certain retirement accounts.

Other Changes

The new FAFSA will see a number of other changes that are worth mentioning:  

  • If the students’ parents live together but are unmarried, they will be treated the same as a married couple. For parents who don’t live together, the FAFSA will be filed by the parent who provides more financial support, rather than the one with whom the student lives for the majority of the time. 
  • Students will also no longer be required to include information about the Selective Service, or answer any questions about drug-related offenses. 
  • Families with multiple students in college will no longer see their EFC divided by the number of students in college, as each student will be issued with a unique SAI.
  • A fee cannot be charged for completing the FAFSA.
  • The FAFSA will now include a question on race and ethnicity.

Who Benefits?

The most obvious beneficiaries of FAFSA reforms appear to be those whose families have lower incomes.

They will see a streamlined process, as well as considerations made for saving money by living at home during their studies.

However, there are some indirect benefits that will help everyone, such as clarifications made to room and board calculations and ease of completion.

When the changes take place, the FAFSA will remain an important piece of your child’s financial aid picture.






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