Congress signed the FAFSA Simplification Act at the end of 2020, which significantly changed the federal methodology or formula for the Free Application for Federal Student Aid, commonly referred to as the FAFSA. Families must complete the FAFSA for students to have access to federal, state, and some institutional aid.
The more substantial changes to the formula went into effect for the 2024-2025 award year.
Here are six significant FAFSA changes that you should know:
1. A Shorter FAFSA
In the new format, the number of questions has been slashed from 108 questions to 36 or fewer. The specific number of questions a family must complete will be based on their unique financial situation.
The federal government reduced the number of questions with the hope that it would encourage more families to complete the form.
Remember, even if you don’t believe you’ll qualify for need-based financial aid, you still need to complete the FAFSA to be eligible for other types of aid and loans!
Analysis: This appears to be a big win for everyone in terms of saving time. This change will hopefully flip the script on what many families perceived as an overwhelming process or just plainly a waste of time. With less time and fewer headaches to fill out the FAFSA, more families all over the economic spectrum will likely submit it.
2. No More Expected Family Contribution. Say Hello to the ‘Student Aid Index.’
Expected Family Contribution, or EFC, is a number resulting from the need-based financial aid calculation that comprises your income and assets to determine what the government believes you can pay toward a year of college costs.
The bill renamed the EFC to the “Student Aid Index” (SAI) to clarify that the number provided isn’t the amount of money a family is required to pay for college.
The main issue here is that the term Expected Family Contribution was somewhat misleading. Some families mistakenly assumed this was the number they were expected to pay at each school. This is not the case. Instead, the number symbolizes to each institution what your “paying capability” is, so to speak, and helps them determine your aid package.
Additionally, the SAI can now be zero or negative for low-income families, making it easier for colleges to determine which students need financial aid the most.
Analysis: This one is rather interesting. Ironically, changing the EFC to the vaguer Student Aid Index may cause less confusion and more transparency for families trying to identify their financial need.
Find your own SAI and estimated costs at three different schools of your choice:
3. Huge Change for Multiple Students Enrolled in College Simultaneously
Under the old FAFSA rules, a family’s Expected Family Contribution was reduced when they had two or more kids in college simultaneously.
Under the new rules, this is no longer the case. Unfortunately, this change will reduce the amount of financial aid at FAFSA-only schools for large middle-income and high-income families that have multiple students in college at the same time. This change augments the importance of planning for college early.
Analysis: This is a massive hit for large middle—and upper-income families. It will effectively eliminate some funding strategies, like taking a gap year or attending community college to enroll in a university with a younger sibling at the same time.
If you have students who are currently in college or will be entering college in the upcoming school years, it will be crucial to plan your funding strategy around this new rule.
There is some good news. Financial aid administrators at FAFSA-only schools can use professional judgment to consider the “multiple student” factor. It also appears that colleges that use the CSS Profile will still divide the student’s SAI by the total number of siblings in college.
4. For Divorced or Separated Households: Change in the Parent Responsible for Completing the FAFSA
Previously, the FAFSA identified the custodial parent as the parent with whom the student lived for the majority of the twelve months before submission. This parent was required to report their financial information on the FAFSA.
Now, the custodial parent is the parent who provides the most financial support for the student. If both parents provide equal financial support to the student, then it is expected that the parent with the larger income is responsible for completing the FAFSA.
For students with married parents or unmarried parents who live together, either parent can complete the FAFSA using household income and asset figures.
Analysis: Although this makes things clearer for families, it could potentially reduce the enormous financial aid advantage that some divorced households had previously.
With financial support becoming the decisive factor, this may negatively affect some students’ aid packages (depending on who gives the student the most financial support).
That being said, students whose custodial parents (as seen by the FAFSA) do not make that much money, even though the noncustodial parent brings in a very high income, are eligible for much more aid at FAFSA-only schools and CSS Profile schools that don’t look at the non-custodial parent’s information.
For more information on paying for college for divorced families before the FAFSA changes, check out this blog post:
Paying for College for Divorced Families: A Closer Look at Financial Strategies
5. Changes to Financial Aid Appeals
The COVID-19 pandemic caused extended unemployment and economic hardship for many families with students heading off to college.
Under the new bill, financial aid administrators can now use professional judgment during a qualifying emergency to consider unemployment when determining a student’s financial aid eligibility. In fact, they can set the prospective student’s (or parent’s) income to zero. The student or parent must only document that they are receiving or have applied for unemployment benefits.
Analysis: This change can be significant for families that are drastically impacted by a pandemic or other qualifying emergency. Currently, many families’ financial need is still calculated based on their “prior-prior year” income. This may allow families easier access to increased financial aid while they’re experiencing hardship.
6. More Students Will Qualify for Pell Grant
The Pell Grant is a form of financial aid available to undergraduate students that does not need to be repaid. The good news is that the bill has expanded eligibility to a larger range of grantees.
Furthermore, students can be made aware of their Pell Grant eligibility BEFORE they fill out the FAFSA, giving lower-income students a huge incentive to not only submit the financial aid form but seriously consider college as an option in the first place.
Analysis: These changes provide a big step forward regarding college affordability for lower-income families.
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A smart college funding plan goes beyond financial aid forms. From asset positioning to tax and investment strategies to the right school choices, there’s a lot to consider.
Schedule a free, personalized consultation to learn how all the pieces fit together — and what your family can do now to stay ahead of the curve.
Author:
The College Funding Coach
Further Reading: