Big Changes are Coming to FAFSA.
The Bottom Line: Federal Aid for college costs accounts for $120 Billion of grants used to pay tuition to colleges and universities. That money was put to use by 13,000,000 students who received some form of aid related to filling out the Federal Application for Financial Student Aid (FAFSA). Adding to its significance, the FAFSA is used by states and schools to determine distribution of other forms of aid such as loans and merit-based scholarships. Still not convinced you should complete it? Check out Real Frequency's Lead Financial Planner's take.
This key and often singular vehicle for connecting college students with the aid needed to pay for its costs is about to see significant changes. Unfortunately, the changes do NOT spell good news for families that will have multiple kids in college at the same time.
When will these go into effect? Good question. But let’s start with WHAT the changes are first.
A recent article released by Mass Mutual does a good job of laying out what families can expect in greater detail. Here is a summary:
- NEW TERM & NEW MATH - The “new” FAFSA introduces a new formula to calculate SIA (Student Aid Index) or what we know as EFC (Expected Family Contribution).
→Don’t know your EFC? Take our EFC quiz to figure it out.
- MULTIPLE KIDS IN SCHOOL? - The SIA will not include the portion of the formula that looks generously toward families with multiple kids in college at the same time. In sum, SIA will not be divided by the number of kids in school and so will not reduce the SIA number in the same way that the EFC was reduced by having multiples in school.
- LOST YOUR JOB? - Income earned from work can be set to zero if the student or parent applied for unemployment benefits within the last 90 days.
- DIVORCED? – Aid eligibility will now be based on the parent who claims the student as a dependent on their taxes. Previously the parent claiming a dependent for taxes could be different than the parent who claimed the student for FAFSA calculations.
- GOT A RICH AND GENEROUS FAMILY MEMBER? - Untaxed income from family members will no longer be reported on the FAFSA. This is great for families with family members willing to contribute to the student’s college costs.
So WHEN will these changes go into effect?
The plan by the Department of Education is to have these changes in place for the 2023 / 2024 school year. That said, if the plan were to fail, it would not be surprising. The FAFSA portal and the technology that supports it are complex and rolling out the coding and technology changes to support all of the new calculation requirements. And so it is really anyone’s guess as to when these changes will be complete.