How the College FAFSA Form Is Changing

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High school seniors are starting to set their sights on graduation. With that comes the nerve-wracking college search. Not only are they looking for the perfect school but they or their parents also are figuring out how to pay for it.

The first step for many Americans is filling out the Free Application for Federal Student Aid (FAFSA). In the past, it has been a long, cumbersome ordeal to use. But on Dec. 1, 2023, changes are coming to the FAFSA form. What are these changes, and will it affect financial aid for students?

Changes in FAFSA Format and Submission Date

In 2020, Congress passed the FAFSA Simplification Act. Its mandate was to reduce the number of questions on the form from 108 to less than 50. The goal is also to make the Pell Grant and other aid more accessible.

Although the FAFSA usually rolls out on Oct. 1, this year, it will open on Dec. 1, 2023. This affects the 2024/2025 school year. It must be submitted by 11:59 p.m. CST on June 30, 2024.

Users will not be required to attach tax returns. Instead, they can pull their federal tax information directly from the Internal Revenue Service (IRS).

Student Eligibility Changes

Some questions have been eliminated from the new FAFSA. This expands eligibility for some potential students.

The Selective Service registration question has been eliminated. This required males 26 and under to enroll in the draft. It is not a requirement to be registered for Selective Service to receive federal aid.

Students gain Pell Grant eligibility who have been in an involuntary civil commitment for a sexual offense. Students incarcerated in a federal or state prison and enrolled in approved education programs are also eligible for the Pell.

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Student Aid Index Used

FAFSA was primarily used to determine a prospective student’s expected family contribution (EFC). This is the estimated amount the student and their family would pay toward the education. This amount gave the federal aid administrators and schools a gauge of how much money would be used for support.

A different formula will now be used. The Student Aid Index (SAI) will be used. In the past, the EFC could not be a negative. It could only be zero. Under the SAI, it can go as low as negative $1,500.

Previously, financial aid administrators and colleges had to lump the zero monetary support students together. The new method will ensure that deemed needier students are receiving additional aid.

Change in Pell Grant

The largest amount of financial aid comes through the Pell Grant program. This is geared toward students with significant financial need.

The new FAFSA will use the adjusted gross income (AGI) in addition to the SAI. This will determine eligibility for Pell award amounts.

Students can estimate their eligibility for the grant before completing the FAFSA.

For 2023–24, the maximum Pell Grant was $7,395, but ward amounts change yearly.

Students With Siblings in College Biggest Losers

Currently, financial aid increases for those with more than one child in college. This helps those parents with multiple children.

The SAI doesn’t include the number of family members in college as part of the calculation. This won’t affect the lower-income students, but families who earn between $60,000 and $100,000 will see reduced Pell Grants.

The change in Pell Grant amounts results from the elimination of the sibling discount. Although the expected family contribution has been reduced proportionally to the number of siblings, the new calculation doesn’t consider siblings.

For example, if the family has two children in school and an expected contribution to college of $4,000, it was applied as $2,000 per child. Now, it’s applied as $4,000 per child.

The Brookings Institution, a research group, analyzed the results of the lost sibling discount. They estimated that almost 900,000 students with one sibling in college will maintain eligibility under the new formula. But they will each lose nearly $3,000 in grant aid. This would total $2.5 billion. An additional 157,000 will lose all eligibility. This adds up to $7,900 each, for $1.2 billion.

Farmers and Small-Business Owners Penalized

Families with an AGI of $60,000 who own small businesses with 100 or fewer employees will see a change. The new FAFSA legislation will also affect families who own farms and have an AGI of $60,000.

The business and farm will be considered financial assets that can be used to pay for college.

For example, currently, a family with an AGI of $60,000 and owning a farm worth $1 million would be expected to contribute $7,600 toward education. But under the new FAFSA legislation, they will be responsible for $40,000 and be ineligible for federal and state aid.

Financial Gifts Exempt

But there is one bright spot: some income is no longer counted. You may receive money for your education from extended family members. Grandparents can help students with tuition without jeopardizing their financial aid.

New FAFSA Two-Edge Sword

The simplicity of the new FAFSA will be a welcomed relief for many families. It will open financial aid to many students. But there are some losers. Discounts will be taken from large families, and some family business owners and farmers will pay the price.

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.