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In order for returning college students or incoming senior high school students to be eligible to receive federal financial aid, like Pell Grants, they need to complete the Free Application for Federal Student Aid (FAFSA®) by the fall of the year BEFORE they are to attend college.  So, for anyone intending to attend college in the fall of 2024, they need to fill out a FAFSA form in 2023.  Normally, the soonest the forms can be accessed is October 1st of every year, but this year will see significant changes to the FAFSA forms and the access to those forms will be delayed.   There will be winners and losers as a result of these changes.  Federal aid is not the only thing based on the results of the FAFSA as many colleges use it to decide how much aid they will offer students based on those results.

Considering just how much hinges on the accurate, timely, and successful completion of the FAFSA form, and considering the magnitude of the reported differences between the old form and the new one starting this year, what follows are some of the most important changes to the FAFSA form and process for 2023:

  1. The FAFSA Will Be Much Shorter and More User-Friendly.

The current 100+ questions will be reduced to around 40, and the wording of many questions will be easier to understand.

  1. Name Change: “EFC” to become “SAI”.

The term Expected Family Contribution (EFC) will now be known as the Student Aid Index (SAI). “EFC” incorrectly implies that it is either the amount of money a family will have to pay for college or the amount of aid they will receive.  The hope is that the new term, SAI, will help clarify that this number is not the amount that families should or must pay, but rather a number used to assess their financial need.

  1. Discount Eliminated for Multiple Children in College.

Currently, financial aid eligibility increases for families with more than one child enrolled in college at the same time. However, under the new legislation, the FAFSA will no longer provide this discount.

This change will reduce financial eligibility for families with more than one student enrolled in college at the same time. For example, prior to the change, a family with a calculated EFC of $40,000 could see that drop by as much as 50% if they had two students in college — that would be an EFC of $20,000 per student. Without this discount, the calculated EFC (SAI) would be $40,000 per student.

  1. In Divorce or Separation, Which Parent Fills Out FASFA Changes.

Currently, if the applicant’s parents are divorced or separated, the custodial parent, defined as the parent with whom the child lives for the majority of the 12-month period ending on the day the FAFSA is filed, is required to fill out the FAFSA.  A big advantage of this is that if the custodial parent is the lower wage earner, then only that parent’s income and assets will be counted for financial aid purposes.

The new legislation will require the parent who provided the most financial support in the “prior-prior” tax year to complete the FAFSA, instead of the custodial parent. The term “prior-prior” means that the financial aid system requires parents to submit their two-year tax returns instead of their most recent ones.

Thus, the parent who provided the most support in 2022 will be required to complete the FAFSA for the 2024-25 award year. This will typically, but not always, be the parent who claims the student on his or her tax return. In cases in which the support provided is 50/50, it may default to the parent or household with the highest Adjusted Gross Income.

  1. No Financial Consequences for Contributions Made by Others.

Currently, families are supposed to report “money received or paid” from others on the student’s behalf on the FAFSA. This means that if grandparents, other relatives, or people outside the family provided financial support to help pay for college costs, like with distributions from a 529 plan, it should be reported. This type of assistance is considered the students’ untaxed income, which increases their total income, and subsequently their EFC.

With the coming changes, money received or paid from someone outside the immediate family will not face any financial consequences, meaning this form of untaxed income will no longer be considered in the Student Aid Index. In short, outside financial support to help pay college costs will no longer jeopardize a student’s chances for need-based financial aid.

  1. Income Protection Allowance Goes Up.

The FAFSA income protection allowance is an income amount excluded from the financial aid eligibility formula. The parent allowance is for the basic living expenses of a family. Students also have their own income allowances.

The revised form increases the parents’ and the students’ income protection allowances for the 2024-2025 school year. The parent allowance for a two-person family with one dependent will be $23,330, and $29,040 for a family of three.  The income allowance for students will increase it to $9,410. This means that a student can earn up to this amount and not jeopardize aid eligibility.

  1. The 2024-25 FAFSA opens in December 2023.

The significant changes to the FAFSA have caused the availability of the FAFSA materials and website to be delayed to December 1, 2023, which is a two-month delay compared to past years.  In future years, the FAFSA availability returns to October 1.  Users can start or access the FAFSA form by visiting and logging in, where they’ll see the link to the FAFSA form on their Dashboard.

The Free Application for Federal Student Aid’s changes are extensive enough that they will undoubtedly affect most applicants.  Overall, the changes are seen to make the distribution of federal student aid fairer, though of course the concept of fair is subjective.  Despite all the reported changes, one fact remains the same: because some of the aid that gets awarded is first come, first served, the sooner the form gets completed, the better.

Editor’s Note: This article was originally published in the September 2023 edition of our “Cadence Clips” newsletter.

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