The Free Application for Federal Student Aid (FAFSA) is changing for 2024 to 2025. This more streamlined form is projected to be available on Dec. 31, 2023. Completing the FAFSA is the first step in receiving financial aid for higher education.
Eighteen million families complete the FAFSA yearly. The new changes may expand those eligible to receive financial aid. But what are these recent changes? And who are the winners and losers?
FAFSA Simplification Act
The FAFSA has been overhauled as part of a federal appropriations measure passed in 2020. The goal was to simplify the FAFSA and open it up to more people.In the past, the FAFSA was available in October for the following school year. But simplifying the form is taking longer than anticipated, and it was postponed until December. This is temporary since the Department of Education (DOE) intends to move the FAFSA opening date back to Oct. 1, 2024, for the 2025–2026 school year.
The new FAFSA is shorter, with fewer questions. Depending on an applicant’s circumstances, they may be able to skip as many as 26 questions. Other students may only need to answer 18 questions. This compares to the former FAFSA, which had over 100 questions.
Two controversial questions have been eliminated. Applicants must no longer register for the Selective Service to complete the FAFSA. That question has been removed.
A drug-related conviction will no longer disqualify an applicant. That question is also eliminated.
Expected Family Contribution Changed
The Expected Family Contribution (EFC) has changed. It is now the Student Aid Index (SAI). Generally, they work similarly. They both estimate the amount a family can pay for the student’s education costs. It factors in household income and assets.
The SAI is used to calculate need-based aid. The applicant’s need will be calculated by subtracting the SAI from the school’s attendance cost.
The old EFC metric allowed for a minimum estimated family contribution of zero. This was after considering income and other factors. The new SAI has a minimum of negative $1,500. That means the contribution can go below zero.
This expands financial aid to more low-income students.
FAFSA and IRS Direct Data Exchange
The new FAFSA will require students to authorize a direct data exchange. This means the applicants give the DOE the right to send personal information, such as Social Security number, date of birth, etc., to the Internal Revenue Service (IRS).This information will be matched with IRS records to retrieve financial information, such as the family’s adjusted gross income (AGI).
This means families won’t have to pull their financial information and attach it to the form. It’s automatic.
If permission isn’t given, then the form will be rejected. An applicant can’t receive federal student aid without financial information.
No Sibling Discount Provided
There is no longer a break for having multiple dependents in college. The new SAI doesn’t consider the number of family members in school as part of the methodology. The form will still ask the question, but will not be figured in financial aid calculations.The result is that families with multiple dependents in school may receive less financial aid in the 2024–2025 school year.
Contributions Made by Others for College Allowed
Under the current FAFSA, monies received or paid by others on behalf of the student needed to be reported on the FAFSA. It was considered the student’s untaxed income and increased their total income and, subsequently, their EFC.But now, grandma and grandpa’s financial gift will go entirely to your education without consequences.
Under the changes, a contribution made in 2023 will not face any financial consequences. In other words, in the new FAFSA, this form of income will not be considered when calculating the SAI.
Parent Providing Most Support Counted
If the student’s parents are divorced or separated, who fills out the FAFSA has changed.In the past, the custodial parent with whom the child was living filled out the form. But that has changed. The new FAFSA requires the parent who provided the most financial support in the “prior-prior” tax year to complete the FAFSA.
Prior-prior means that parents are required to submit their two-year tax returns instead of their most recent ones.
It doesn’t matter who claims the dependent on their tax returns. It may default to the parent or household with the highest AGI.
Income-Protection Allowance Increase
The income-protection allowance is the amount of income that is excluded from the financial aid eligibility formula.It is an allowance for basic living expenses for the family and varies according to household. The legislation for the new FAFSA raises both the parents’ and the students’ income allowance.
For example, the parent allowance for a two-person with one dependent will go from the current $19,080 to the new $23,330.
The income allowance for a student is going from the current $7,040 to $9,410.
In other words, the amount expected to be contributed by the student or family to college, will be reduced. Their financial aid eligibility will increase.
Deadlines for FAFSA
The final deadline for filling out the FAFSA for the 2024–2025 school year is June 30, 2025. But don’t wait; some financial aid can dry up quickly. It’s a first come, first serve system.States have separate deadlines from the federal. The best course of action is to fill out the FAFSA as soon as it’s made available.
FAFSA Changes Seem Positive
Overall, the changes in the FAFSA sound positive. The original FAFSA was overly complicated and may have deterred many needy individuals.With the new methodology and income protection allowance increases, both low- and middle-income students may find additional financial aid.
But those parents who have multiple dependents in school may have a bigger financial burden for school than in previous years. There may also be confusion over which parent should fill out the FAFSA in the case of divorce.
Since the new FAFSA hasn’t rolled out yet, it’s too early to tell who the real winners will be.
The Epoch Times copyright © 2023. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
