New FAFSA: 6 Key Things you Should Know

Financial Aid FAFSA

The FAFSA was recently approved for a major overhaul. Thanks to Congress, the 108-question form will dwindle down to a manageable 36-question form for the 2023-24 school year. These changes to the FAFSA, courtesy of a bill recently passed by Congress, aim to make it easier for more families to apply for financial aid. Students applying for college beginning in the Fall of 2022, will be among the first to use the new FAFSA. Here are six key changes every family should know:

EFC is No Longer a Thing

The new FAFSA will say “Bye, Bye, Bye” to the EFC – Expected Family Contribution. Colleges used the EFC to determine a student’s eligibility for federal and some non-federal financial aid. This number appears on the Student Aid Report a student receives after filing the FAFSA. In a couple of years, the Student Aid Index (SAI) will replace the EFC.

The confusion caused by this term (EFC) was the impetus for changing it to SAI. Many families mistakenly thought the EFC represented their maximum contribution towards college. However, the EFC is generally used to determine financial need which is the cost of attendance minus the EFC.

In a few rare cases where colleges meet full need, parents will only have to pay the EFC. For everyone else, the EFC is only a starting point. The SAI will, hopefully, create less confusion for parents.

Multiple children in college

Currently, parents with more than one child in college get a break. For example, a parent with two children in college received a reduced EFC (as much as 50%) for the second child. A lower EFC often translates to more financial aid.

However, the new FAFSA will bring this practice to an end. Parents will no longer receive that EFC discount.

Expansion of Pell Grant Eligibility

Another change that is coming to the FAFSA is the change in Pell Grant eligibility. A family with an Adjusted Gross Income (AGI) about 175% under the poverty line will be eligible for the full Pell Grant (currently $6,495 for the 2021-22 award year).

Additionally, families will be able to figure out their Pell Grant eligibility before applying for financial aid.

RELATED POST: FINANCIAL AID GUIDE

Easier FAFSA completion using IRS

Families will still be available to retrieve their tax information from the IRS data retrieval system. This feature allows you to pull the your income tax returns data directly into your FAFSA. At the moment, this information is available to families. However, a shorter FAFSA means your income tax information will soon be able to fill out most of the FAFSA.

There are several advantages to using the IRS data retrieval tool. If you use this tool to complete the FAFSA, you are less likely to enter erroneous data. As a result, this tool could significantly reduce the overall number of verifications. From time to time, the IRS will flag a FAFSA for verification. It just means that the Financial Aid Officers could request documentation to support the information in your FAFSA.

Change in Custodial Parent

There is a major change to the custodial parent status for divorced and separated parents. Currently, the parent where the student spends most of the year is required to fill out the FAFSA.

However, the new FAFSA will require the parent who claims the child as a dependent for income tax purposes to fill out the FAFSA. As a result, this change could lead to some families receiving a smaller financial aid award.

More transparency

The new FAFSA regulations will require colleges to be more transparent. They will have to display the full Cost of Attendance (COA) on their websites. For example, tuition and fees, books, housing, meal plans, study abroad and transportation.

Currently, many parents struggle to determine the true cost of college before their student sets foot on campus. Congress is now asking colleges to disclose all of the “hidden fees” a student can expect to pay as a full-time or part-time student living on or off campus.

The new rules, along with the new FAFSA, will go into effect for the 2023-24 financial aid cycle. At that time, colleges will have to begin listing the full COA wherever tuition and fees are listed on their website.

Conclusion

The upcoming changes to FAFSA aim to make the financial aid process easier and more transparent. Some changes will lead to larger financial aid for some and a reduction for others. This major overhaul of the FAFSA will change financial aid in a big way.