FAFSA Simplification Act: Changes to the FAFSA

What is the FAFSA Simplification Act?

 Navigating how to pay for college can feel like a maze, especially if you’re a new college student filling out the Free Application for Federal Student Aid (FAFSA) for the first time. Fortunately, the federal government has recently announced changes to make applying for federal student aid more straightforward for students and families. 

This initiative, known as the FAFSA Simplification Act, is anticipated to take full effect in December 2023, and the changes will impact students and families applying for the FAFSA for the 2024-2025 school year. Some changes were implemented in July 2023, but more are planned to come by the end of 2023. 

What the FAFSA Simplification Act is and why it’s important 

The FAFSA Simplification Act is a significant overhaul of the legacy process the federal government used to award financial aid. Here’s a look at what this act means for students and families and why it’s important to understand the changes coming. 

The FAFSA Simplification Act has ushered in a new process for applying for financial aid. The first wave of changes took effect on July 1, 2023. The remainder of the updates will be fully implemented by the 2024-2025 school year in December 2023. 

One of the most pivotal changes is the shift from Expected Family Contribution (EFC) to the Student Aid Index (SAI). The EFC is a number that the federal government previously used to help determine a family’s eligibility for federal student aid. Many families completing the FAFSA thought the EFC was the amount required to contribute to college costs, which wasn’t the case. In reality, the EFC calculated how much aid you could get, not how much you had to pay. 

The Student Aid Index (SAI) aims to be more straightforward and give families a clear understanding of their financial responsibility. Unlike the EFC, the SAI will consider more factors, such as minimum student contributions, and remove the number of family members in college from the calculation to provide a more accurate picture of a family’s financial situation.  

Understanding the transition from EFC to SAI is crucial because it can help you better understand how much financial aid you might receive and how much you may need to borrow in undergraduate loans or graduate loans. It provides a more accurate picture when budgeting for college expenses.  

Why was the FAFSA Simplification Act made? 

The FAFSA process has often been a source of stress and confusion for students and their families. Understanding how FAFSA works is complicated, often requiring hours to complete and sometimes expert help to navigate its intricacies. Knowing how the EFC was calculated and what it meant for your financial aid package was another hurdle that often led to misunderstandings. 

FAFSA has also been criticized for a lack of transparency throughout the financial aid process. The old system didn’t adequately consider the financial diversity among applicants, like families with multiple children in college or those with unique financial circumstances that couldn’t be easily quantified. 

Confusion around who qualifies for FAFSA resulted in financial aid packages that didn’t accurately reflect a family’s ability to contribute to educational costs, making college less accessible for many students. The FAFSA Simplification Act aims to address these pain points by streamlining the application process and introducing a more equitable system for determining financial aid. 

Changes to FAFSA: what to expect 

The FAFSA Simplification Act is bringing a wave of changes designed to make the financial aid process more straightforward and accessible. From removing specific questions to introducing the Student Aid Index, these updates aim to alleviate some of the stress and confusion often associated with applying for federal student aid. Here’s what you can expect: 

Federal student aid changes

One of the most notable changes is the expansion of Pell Grant eligibility. The new rules make it easier for students to qualify based on factors like family size and adjusted gross income. If you’ve previously received a Pell Grant but couldn’t complete your studies due to your school closing, or if your loans were discharged under borrower defense to repayment, you’ll now have renewed eligibility. This makes federal aid more accessible to a broader range of students. 

Revised FAFSA application

The FAFSA application is getting a makeover to be more inclusive and user-friendly. Selective Service Registration and drug-related convictions used to act as a roadblock for many and thus will no longer be part of the application. Additionally, the FAFSA application will now be written in up to 11 languages whereas only English and Spanish were previously available. This makes the application process more accessible to students and families who speak other languages. 

Transition from EFC to Student Aid Index 

The Expected Family Contribution (EFC) is being replaced by the Student Aid Index (SAI). While both are used to calculate need-based financial aid, the SAI corrects the misconception that the number represents what a family can contribute to education costs. Many families take loans to fill aid gaps and pay more than the EFC amount. The SAI will be determined based on the information you provide on the FAFSA, and its introduction offers a more accurate reflection of a family’s financial situation. 

Other changes 

In addition to the major shifts in federal aid and the FAFSA application, several other updates are on the horizon that you should be aware of: 

• Asset Disclosure: You won’t have to disclose your assets on the FAFSA if you meet specific criteria, such as receiving means-tested benefits like SNAP. This simplifies the application process for many families. 
• Cost of Attendance Calculation: The formula for calculating the cost of attendance will now include more factors like living expenses, and the cost of obtaining professional credentials will be considered. This holistic look at budgeting for college will give students and families a more accurate picture of educational expenses. 
• Expanded access to Pell Grants: Your Student Aid Index will automatically be set to zero if you’re eligible for the maximum federal Pell Grant. This change allows you to qualify for more need-based aid, making college more financially accessible. 

These changes simplify the financial aid process and make college accessible to more families. Whether you’re a new applicant or a returning student, it’s crucial to understand these updates to make the most of the aid available to you. 

How to maximize federal student aid with FAFSA simplification

The FAFSA Simplification Act brings several changes that can help you maximize your federal student aid.  

One of the key features is the ability to directly import tax information from the IRS, making the application process smoother and potentially increasing your aid eligibility. This feature can be particularly beneficial if you’re not required to file taxes because your income is below the threshold. It streamlines the process and ensures accurate reporting of financial data. 

Another advantage is the introduction of provisional independent status. This status can offer significant benefits, especially if you’re a student who doesn’t have financial support from parents. Being classified as provisionally independent can make you eligible for more aid, as the calculation will not consider parental income.  

Lastly, remember to explore other financial assistance programs. State-based aid, scholarships, and work-study programs can supplement federal aid, providing a more comprehensive financial package for your education. 

Learn more with Ascent 

Navigating the changes brought by the FAFSA Simplification Act can be complex, but being informed is the first step to making sound financial decisions for your education. From understanding the transition from EFC to SAI to leveraging federal tax information for aid eligibility, Ascent is here to help equip you with the knowledge you need to pursue your education.  

For more insights, check out Ascent’s financial wellness tips, learn about cosigned student loans, and stay updated on FAFSA deadlines. 

FAQ 

When did the FAFSA Simplification Act pass?

The FAFSA Simplification Act was signed into law on December 27, 2020, as part of the Consolidated Appropriations Act 2021. The changes are being rolled out in phases, with some already in effect as of July 1, 2023. 

Is FAFSA changing in 2024-25? 

Yes, the FAFSA is undergoing significant changes for the 2024-2025 academic year. These changes include the transition from Expected Family Contribution (EFC) to Student Aid Index (SAI), simplifying the application process, and more. The aim is to make the financial aid process more accessible and beneficial for students. 

Who qualifies for the simplified needs test for FAFSA? 

The simplified needs test, which is often being referred to now as “Applicants Exempt from Asset Reporting” is designed to simplify the FAFSA application process for certain applicants. You may qualify for the simplified needs test if you meet any of the following criteria: 

• Your income falls below the tax filing threshold. 
• You have an SAI between negative $1,500 and $0, automatically qualifying you for the maximum Pell Grant award. 
• Your adjusted gross income is less than $60,000, and you do not file a tax return with lettered schedules A-H or have net business income over $10,000 loss or gain. 
• You received a means-tested benefit like SNAP. 

Understanding these qualifications can help you navigate the FAFSA and maximize your federal student aid.