The FAFSA Simplification Act is an overhaul to the FAFSA application process and requirements beginning in the 2024-25 school year. These changes will affect the federal student loan application process, need requirements, and assessments. This new law will apply to every state and every school that awards state and federal grant money through the FAFSA application.
Here are some of the major changes, and how they could impact you or your student:
Later Application Date
FAFSA applications used to open in October, but this year, applications for the 2024-25 school year are expected to become available in December 2023. This is expected to be a temporary change, and the open application date for 2025-26 is penciled in as Oct. 1, 2024.
If you’re planning to apply, try to get it done as soon as you can. Some aid is only available until it runs out, so it’s worth applying as soon as you can to increase your chances of getting more financial assistance.
The Student Aid Index
The FAFSA Simplification Act replaces the Expected Family Contribution (EFC) with the Student Aid Index (SAI). Both of these numbers estimate what families are able to pay for education based on factors like income and assets.
For the 2024-25 school year, aid is determined by subtracting your SAI and other financial assistance from the cost of school attendance.
But there are some key differences between the SAI and EFC, including:
- Fewer questions to determine financial eligibility. Previously, the FAFSA application had more than 100 questions, but now it will have less than 50.
- A lower minimum SAI. The new SAI amount will be -$1,500, while the old metric was at zero.
- Beginning with the 2024-25 school year, there is no longer a break for families who have more than one student in college at a time.
- Students need to report the income of the parent who provides the most financial support, instead of the parent they live with most of the time.
- Some income is no longer considered for financial aid needs. What this means is that untaxed money – like gifts received from extended family members – may be excluded. For example, if grandparents wanted to fund a 529 plan and distribute the funds to the school, that would not create additional income for the student and hurt their chances at receiving more financial aid.
Pell Grant Change
Pell Grants, which are determined based on poverty guidelines, do not need to be repaid, and are offered to students with “exceptional financial need.”
With the new law, both independent and dependent students below the poverty line could qualify for the Pell Grant automatically. Pell Grant access has also opened up to incarcerated or confined students, and students who were defrauded by their school, or attended a school that is now closed.
FAFSA and Preparing to Apply
If you will be applying for FAFSA in the next few years, keep in mind that FAFSA looks at your income for the past two years to determine eligibility. If you have a little time before you’ll be applying, you might want to look into putting more money into a deferred compensation plan, 401k, 457, IRA, HSA, or other accounts that help reduce your taxable income before you apply. That would help you potentially access more financial aid when the time comes.
Note: Apply for FAFSA every year, even if you don’t think you qualify. That way, if you lose a job or your income changes dramatically during the year, you might be able to still qualify for aid.
Selecting the Best College for Your Student, and Your Situation
When you or your child are looking at colleges, you should consider three main factors:
- Is it the right fit for the student?
- Is it the right price?
- What is the payment strategy?
A school that’s the best fit academically could lead to greater financial aid, like grants and scholarships, from the school. Opting for a stretch school, on the other hand, could make it harder and more competitive to receive additional aid.
A more expensive or prestigious school isn’t always the best choice for the student, so weigh all options carefully before making a decision.
Also make sure that you and your student understand the loan process, and what the repayment process looks like. There are so many options for higher education now; it’s well worth exploring all options to find the best path forward.
Do you need help planning for your financial future? Contact me today to set up a meeting to talk about your goals.