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Big Changes for FAFSA - Will Your Family Be Hurt or Helped?

There are some big changes coming to The Free Application for Federal Student Aid, known as the FAFSA. FAFSA is required for students who want to be considered for federal financial aid. The form is used by colleges and states to determine eligibility for grants and scholarships. Students must reapply each year to receive aid.

For the 2024-25 school year, FAFSA will be reduced to 36 questions from 108, and it will be easier to import income data from tax records. The Department of Education is also changing its formulas to determine who will qualify for aid and how much they’ll receive. The changes fulfill legislation passed in 2020 aiming to make student aid easier to get.

The goal is to make the application process easier, but there are some initial problems. First, the new form will only be available in December, at least three months later than usual, which cuts the amount of time families have to apply. Secondly, the new formulas aim to calculate wealth instead of cash flow in determining what aid is offered. “These changes, and others, will have profound effects on students’ eligibility for financial aid,” the nonprofit thinktank Brookings Institution said earlier this year in an analysis. “There will be winners and losers.”

What 2024-25 FAFSA changes can your family expect?

◾ FAFSA won’t open until December, instead of the usual Oct 1.

◾ Both students and parents must create a Student Aid Account to get an FSA ID before completing the form. An FSA ID is an account username and password combination.

◾ Allow at least three days because in the new process, the Social Security Administration will require verification of FSA IDs before tax information can be accessed. Students and parents must log in to the FAFSA separately to complete each of their respective sections.

◾ If parents are divorced or separated, the parent who provided the most financial support in the last calendar year will now complete the FAFSA.

◾ The number of students a family has enrolled in college will no longer factor into the FAFSA calculation.

◾ The net worth of family farms and small businesses will now be required as part of the application.

How could these changes hurt families?

The later start in December will cut the time families have to submit FAFSA, which will still have a final deadline of June 30, 2024 but some states and individual colleges set their own deadlines, separate from the federal deadline. Some of those are as early as January after the FAFSA release.

◾ The Expected Family Contribution becomes the Student Aid Index and will still be subtracted from the cost of attending to determine how much aid you might need, but it will no longer be divided by the number of students a family has in college. That means most families with more than one student in college will be eligible for less financial aid.

The amount of aid that these students will be eligible for “could be reduced by thousands, and perhaps tens of thousands of dollars, relative to the current formula,” EconoFact, a publication that analyzes economic and social policies, said.

Brookings estimated that almost 900,000 students with one sibling in college will maintain eligibility for financial aid under the new formula, but those students could lose nearly $3,000 in that aid, totaling $2.5 billion. Another 157,000 will lose all eligibility, which could have provided up to $7,900 per student, totaling $1.2 billion, it said.

The divorced parent who provides the most financial support for the student must file the FAFSA and report their income and assets. So for many families their EFC/SAI (and the net cost of college) will be much higher than it would be if the custodial parent filed the FAFSA.

◾ Families with an adjusted gross income of $60,000 and own farms or small businesses with fewer than 100 employees will have to include their farms or businesses as part of their financial assets that can be used to pay for college and reduce their needs. Under the new rules, many families will be deemed ineligible for some federal and state aid programs and more reliant on student loans.

Are there any benefits to the new FAFSA?

◾ FAFSA dates return to normal the following 2025-26 year, opening on Oct. 1, 2025, and closing on June 30, 2026 with more time to complete the simpler form. The new FAFSA is expected to lead to increased completion rates and improve college access and affordability by making billions of dollars of financial aid available to students.

◾ Lower-income families will be eligible for more aid under the new formulas, which include:

Larger income protection allowances: Those allowances cover a family’s basic daily living expenses and are excluded from the financial aid eligibility formula. Larger allowances lower the income students and parents can contribute to college expenses, which will increase their financial aid eligibility.

Allowances will increase by 20% for parents, up to about $2,400 (35%) for most students, and up to about $6,500 (60%) for students who are single parents.

Automatic Pell Grants based on income and household size: Families making less than 175% and single parents making less than 225% of the federal poverty level will receive the maximum award, while minimum grants will be guaranteed to students from a household earning below 275%, 325%, 350%, or 400% of the poverty level, depending on the household structure. This makes it quicker and easier for people to know they’re eligible. The Pell Grant is the federal government’s primary grant aimed at low- and middle-income students.

Restoring Pell eligibility: Incarcerated students and students who have been convicted of drug-related offenses will be eligible again for financial aid.

A negative contribution score: Family contribution amounts could be as low as minus $1,500, instead of zero. Although federal financial aid cannot exceed the cost of college attendance, the negative score could be used to distinguish among the neediest students, allowing states and institutions to more accurately target need-based aid.

What should I do if I have a High School Senior? Take the time to calculate if and by how much your 4-year college costs will increase due to these changes, and possibly choose a less expensive school to attend. These changes to the FAFSA do not affect the aid given by many private colleges that require the CSS Profile in addition to the FAFSA. The CSS Profile still considers if you have multiple siblings in college simultaneously, and it treats the income and assets of divorced parents (and their new spouses if remarried) differently than the FAFSA. While CSS colleges generally have a higher cost of attendance, they also typically award higher amounts of aid compared to public colleges. So be sure to compare CSS schools to see if their net 4-year cost is lower than at FAFSA-only schools.

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