By Mary Nickeson, Senior Vice President, Invite Education
The U.S. Department of Education has made some big changes to how eligibility for college financial aid is calculated. The changes come from the FAFSA Simplification Act and represent significant modifications to the methodology, the processes, and the form used to award federal student aid starting with the 2024-25 award year.
While the new approach has streamlined and simplified the process, it has also resulted in a delay to the availability of the new Free Application for Federal Student Aid (FAFSA®). This affects all financial aid applicants enrolling in or returning to college next year.
New FAFSA expected in December 2023
Students and families will need to wait until December 2023 to complete the FAFSA for the 2024-25 award year. Traditionally (since the 2017-18 FAFSA), the form has become available on Oct. 1.
Complete the FAFSA as soon as possible
It is important for students and families to prioritize completing the 2024-25 FAFSA as soon as it becomes available to be considered for maximum financial aid eligibility. A significant amount of aid is given out on a first-come, first-served basis and being at the front of the line is to your advantage. Deadlines for various colleges and state agencies will start to come up quickly after the FAFSA is released this year. Meeting financial aid deadlines is vital.
Every student can and should complete the FAFSA, regardless of family finances and the type of aid you are seeking. Even if you plan to borrow, the FAFSA is your best route to federal student loans, which generally have lower interest rates and more protections than private borrowing options.
Prepare now to complete the FAFSA
- An FSA ID is required to complete the FAFSA. Students can set up their FSA ID account right away. Parents of dependent students will need an FSA ID, too. Since it may take up to several days for the IDs to be verified, doing this now will prevent further delays.
- Make sure tax forms for 2022 have been filed and are correct for the student as well as the parent(s) who need to provide tax information.
- Soon-to-be first-year students can get their college lists ready, keeping track of critical deadlines at colleges of greatest interest.
Highlights and benefits
There are numerous benefits of the FAFSA simplification act that should make the financial aid application process easier for families.
- The new FAFSA reduces the maximum number of questions from 108 to 36.
- The FAFSA will be available in more languages, including the 11 most common languages spoken by English learner students and their parents.
- Students may include up to 20 colleges and universities on their FAFSA instead of 10.
- The term Expected Family Contribution (EFC) has been replaced by Student Aid Index (SAI). Like the EFC, the SAI will calculate eligibility for need-based aid programs.
Cost of Attendance minus the SAI = Financial Need
- For divorced and separated parents, the parent responsible for providing information on the FAFSA for a dependent student will be the parent who provides the most financial support to the student in 2022, instead of the parent with whom the student lived the longest during the previous 12 months.
- Distributions from grandparent-owned 529 accounts will not be reported as untaxed student income. Grandparents-owned 529s will not be reported anywhere on FAFSA. Prior FAFSA methodology often reduced the benefit of grandparent-owned 529s by counting distributions heavily when calculating need-based aid.
- Education savings accounts designated for the financial aid applicant’s siblings will no longer be collected on the FAFSA.
- Applicants will be required to use the IRS Direct Data Exchange, providing consent for the department to receive tax information directly from the IRS or confirmation of non-filer status.
- Number of children in college will no longer be a factor when calculating financial need, although the FAFSA will still collect the number of children in college and provide that information to the institutions listed on the FAFSA.
- Family farms and small businesses must report net assets (excluding the principal place of residence in the case of family farms).
The above details are not exhaustive and may be subject to change. Additional details about the FAFSA and the federal financial aid process can be found at StudentAid.gov.
About the author:
Mary Nickeson is the Senior Vice President at Invite Education. Invite Education provides customized calculators (including a new Financial Aid Estimator) and the other decision-support tools to help families, employees, and advisors make college-funding decisions with confidence.