FAFSA Changes Are on the Way

2024 Update: Originally published in September 2022, this article has been updated, first in May 2023, then again in September 2024, to reflect some of the changes to the FAFSA announced by the Department of Education. We will publish future updates as they occur.

If you have a student who will be enrolled in college next year, you might have highlighted October 1 on your calendar. This is the date the U.S. Department of Education has historically made the FAFSA (Free Application for Federal Student Aid) available for the upcoming school year. The department recently announced that the form will not be available for the 2025-26 school year until December 2024.

The form is required for students to be considered for most need-based financial aid. We suggest completing the form even if the application shows you do not qualify for need-based aid. Many colleges use the FAFSA to collect information for merit grants and scholarships, which can vary greatly from school to school. If you don’t want to leave any money on the table, we suggest you take the time to complete one every fall. Some schools even increase merit aid just because a student filled out the FAFSA! The sooner you get it done, the better. Many experts suggest completing the form within a month of its release to avoid missing early award deadlines.

Some schools ask you to complete the CSS Profile as well. The CSS Profile is an online application operated by the College Board and is currently used by 265 institutions and scholarship programs to award non-federal institutional aid. This article focuses on changes to the FAFSA.

The FAFSA Simplification Act (FSA) was presented to Congress as part of the Consolidated Appropriations Act and was signed into law in December 2020. Changes resulting from this act are coming to the FAFSA in phases, beginning with the 2023-24 school year and continuing over the next few years.

Changes to the FAFSA

• SAI replaces EFC: The vocabulary will change. Student Aid Index (SAI) will take the place of Expected Family Contribution (EFC) in the formula to calculate demonstrated need. They updated the language in hopes of reducing confusion. Note that a demonstrated need does not mean you will receive that amount in aid. The CSS Profile will continue to use EFC.

• Number of children in college at same time: The SAI does not take into account the number of children from the same family in college at the same time. Said another way, having multiple children in college at the same time will no longer work in your favor. This is not great news for families with more than one child in college in any given year. The “sibling discount” is still a factor on the CSS Profile.
• Retirement plan contributions: Contributions to workplace retirement accounts are no longer added back to the SAI calculation. This means that increasing contributions to a work-sponsored retirement plan (not an IRA) may have the effect of reducing the SAI.
• Additional college savings: College savings for siblings in 529 plans or Coverdell accounts are no longer treated as parental assets. Parents can effectively reduce their SAI by shifting more college savings to a non-college-age sibling.
• Pell Grants: Access to Pell Grants will increase. A Pell Grant is a form of need-based federal financial aid that typically does not require repayment, making it highly desirable. The U.S. Department of Education awards these grants to eligible low-income students to help pay for college costs, including tuition, fees, room and board, and other educational expenses.
• Grandparent support: This positive development will also affect our earlier article, “What is the best way to help pay for my grandchild’s education?” In the past, tuition support received from grandparents was considered the student’s income, potentially reducing their financial aid. Following this change, when a grandparent helps pay for a grandchild’s education via their 529 plan or any other source, it will not appear on the FAFSA. Assistance from grandparents will no longer negatively impact student aid. And, we won’t have to play the game where grandparents wait until spring of the student’s junior year to chip in. Grandparents will be able to help from the start! Before we get too excited, we should note this only applies to the FAFSA. If the school relies on the CSS Profile to determine aid, then support from grandparents may still be a factor.
• Reporting if parents are divorced or legally separated: In the past, the parent who completed the FAFSA was the parent with whom the student lived 51% of the time. Once this change is implemented, the parent who fills out the FAFSA will be the parent who financially supports the child the most. If the financial support is equal, then the household with the highest income must complete the FAFSA.
• The form is receiving a visual update intended to make it easier to use. The goal is to ultimately reduce the maximum number of questions from 108 to 46.
• Drug convictions will no longer affect the student’s eligibility to receive federal student aid.
• Male applicants can qualify for federal student aid even if they don’t register with the Selective Service System (registering for the draft).

Please feel free to reach out to your advisor at Bragg if you have questions. We are happy to help and point you in the right direction if additional resources are needed.

This information is believed to be accurate at the time of publication but should not be used as specific investment or tax advice as opinions and legislation are subject to change. You should always consult your tax professional or other advisors before acting on the ideas presented here.