The FAFSA is getting a Major Overhaul
If you’ve ever filled out the FAFSA, you know that it is a beast of an application and can be really confusing, especially for teenagers who are oftentimes dealing with such an important application for the first time in their lives.
Back in December 2020, congress passed the FAFSA Simplification Act. The intention of this act was to, well, simplify the FAFSA! This act involves some major changes to the application that will be phased in over time. Some have already gone into effect and the changes are scheduled to be fully implemented for the 2024-2025 school year.
This bad boy is about to get a major overhaul, and we want to make sure you are up to date on these changes.
If you’re more of the video type, check out the YouTube video above!
Changes already in effect
Three major changes have already gone into effect beginning with the 2021-2022 school year:
Repeal of Subsidized Usage Limits
In a prior post, we mentioned that there are limits to the amount of federal student loans that you can take out. That limit is further broken down by the type of loan.
Since 2013, Direct Loan requirements have limited a borrower’s eligibility for Direct Subsidized Loans to a period not to exceed 150% of the length of the borrower’s educational program. So, for example, if you are pursuing a typical 4 year bachelors degree, and you’ve been in school for more than six years, you run the risk of losing your eligibility for direct subsidized loans. Instead, any additional loans you might take out would be unsubsidized, meaning they accrue interest from day one. The FAFSA Simplification Act has removed that rule.
Implications of Drug Conviction
The FAFSA asks whether you’ve been convicted of a drug related crime while receiving federal aid. Up until now, there were negative consequences to your aid if you selected yes. You will still see that question show up on the FAFSA for the 2021-2022 and 2022-2023 school years. However, this new law has removed the effects of answering this question.
Selective Service Requirement
Up until now, male students were forced to register with Selective Service for the US military in order to receive financial aid. Thankfully, that’s gone now. Again, the question will still be there on the next couple of years’ FAFSAs, but it will have no effect.
2023-2024 Effective Changes
Many of the new changes passed in the FAFSA simplification act were supposed to take effect during this year. However, that has since been delayed a year. Nothing new is really happening for that year, except that both the Selective Service and drug conviction questions will be removed from the FAFSA, as well as the option to register with the Selective Service via the FAFSA.
2024-2025 Effective Changes
The big, exciting changes really come during the 2024-2025 school year. Here’s what to expect:
Goodbye EFC; Hello SAI
The EFC is a number that you get after completing the FAFSA that’s pretty much meant to signify what the department of education thinks your family can afford to pay for college. It’s based on several factors, including income, non-retirement assets, and household size to name a few.This terminology was pretty confusing for some students.
Nothing about this number is changing. However, it is now going to be called the “Student Aid Index” or SAI. This new language is meant to represent an eligibility index for federal student aid, and the minimum SAI will be -$1,500 as opposed to the current $0 minimum for the EFC.
The application will be much shorter
Thank the Lord. In fact, the number of questions will be reduced from over 100 to approximately 36. The FAFSA simplification act also allows more applicants to have their income automatically transferred into the FAFSA from the IRS, rather than having to self-report or manually enter it.
Multiple family member benefit
Here’s one change that’s going to really suck. Up until now, having multiple family members in college at the same time would benefit financial aid eligibility by reducing your expected family contribution or EFC. That’s going away with the new FAFSA updates. Why did they do this? I don’t know. What I do know-This has the potential to have a significant impact on financial aid eligibility.
Required parental information
Whose information is required on the FAFSA may also be changing. Currently, in a two-parent household, either parent can complete the FAFSA. However, if the parents are divorced or separated, the custodial parent, meaning who the child lives with most of the year, is required to report their information on the FAFSA.
With the new updates, the parent who provides the most financial support will now need to report their information on the FAFSA instead of the custodial parent. In cases in which the support provided is 50/50, it defaults to the parent or household with the highest adjusted gross income (AGI). This is really going to suck in the instance where the custodial parent is making significantly less money than the other parent.
Expanded access to pell grants
The FAFSA Simplification Act will link eligibility to family size and family income as a percentage of the federal poverty level for the applicant's household size. Incarcerated students will regain the ability to receive a Federal Pell Grant. Federal Pell Grant lifetime eligibility will also be restored to students whose school closed while they were enrolled or if the school is found to have misled the student. Legislators anticipate that this change will allow 1.7 million more students to qualify for pell grants each year and make thousands more eligible for partial grants.
Our thoughts on the FAFSA Simplification Act
Yes, they simplified the FAFSA, made it easier to complete, and made more people eligible for financial aid. However, in other ways, they’ve made the situation worse for people with multiple members of the family in college and for some single parent or blended families.
We dive deep into tackling debt repayment and so much more in our program, MONEY 180™, so if you’re interested in learning more about that, go on and check it out!