By Dr. Belinda Leon, Senior Advisor with USP – University Scholar Program
The Free Application for Federal Student Aid (FAFSA) is the form that all families should fill out annually to determine if their college student is eligible for financial aid to help pay for school costs.
FAFSA will analyze each family’s financial situation to determine if the student can be awarded grants, loans, or student work-study pay. Information provided on the FAFSA is used by the Federal Government, the student’s state of residence, and the student’s college to decide how much money to award for college expenses. There are also private organizations, such as scholarship granting entities, that use FAFSA data.
This application typically opens yearly on October 1st and families are encouraged to complete the form promptly because there is an advantage in obtaining more funds by submitting early. However, this year (2023), the form has been delayed until December. Why? Because the FAFSA form is being modified to be shorter, simpler, and with a new formula to analyze financial data. Or, so they say!
Since 2021, FAFSA has undergone several changes. This year, the main change in FAFSA is regarding the financial needs analysis formula and the awarding of Pell Grants. A Pell Grant is money awarded to a college student with financial need that is earning their first bachelor’s degree. A Pell Grant does not have to be repaid and for the 2023-2024 year a student could be awarded up to $7395. Another major change is that the term “Expected Family Contribution” (EFC) will be changed to “Student Aid Index” (SAI).
EFC was a dollar figure that stated how much money a family would be expected to contribute to college costs. This number did not reflect an actual payment, rather it was a guide to determine how much aid the family needed to cover college costs. The new SAI, would could be a negative number, will be a number that is a code for how much financial aid a student qualifies for based on FAFSA answers as well as data stored by the Internal Revenue Service from tax forms submitted earlier. This year, when completing the FAFSA, parents will be required to link their FAFSA to their Federal Income Tax Return.
One particular change this year that concerns this author greatly is that the number of children in college will no longer considered in the SAI calculation. Previously, if a family had more than one student in college, FAFSA would take the expenses into consideration and use it as a factor in awarding financial aid to all students in the family. It is recommended that if you believe you are not receiving enough financial aid for your students, be sure to speak with the Financial Aid advisor at the attending college. The Financial Advisor will assess your particular situation and could use professional judgment to adjust your FAFSA and qualify you for more financial aid.
There are a few more changes to note: If the adjusted gross income of the parents or of an independent student is under $60,000.00, then assets are excluded from the financial need formula. If you have some type of educational savings account, you only need to report on that one student’s account- not all of your students’ savings. If you are a parent who receives child support, that child support now counts as income. If you have your own business, the net worth of the business is reported regardless of the number of employees you have. And, if you have a farm, that is not your main residence, the worth of said farm must be included.
An upcoming positive change in the FAFSA is the increase in Income Protection Allowance (IPA) amounts. IPA refers to a specific portion of a parent or student’s income being “protected” from the financial aid calculation. Income is always considered when the amount of financial aid is being determined, however a certain amount of your income will not count in the formula because it is assumed that you will need that amount for basic living essentials. It is expected that as a student you can earn up to $7000 in wages and it will not be counted against your financial aid need. Parents and single-parent students will also see an increase in IPA.
As with any federal government program implementation, it is important to be ready for this new process and procedure with FAFSA. Parents should meet with their financial advisor or accountant to review their personal financial situation and understand how it will impact the new FAFSA calculation. It is always possible to plan ahead by carefully considering how FAFSA will look at your income tax data from two years prior. With student financial aid, preparation and savings are key!