The FAFSA Simplification Act makes changes to the FAFSA for the first time in 40 years

The FAFSA Simplification Act is here

Changes higher education institutions should expect

The current Free Application for Federal Student Aid (FAFSA) application requires students to navigate and interpret financial aid language, answer over 100 questions and interpret tax returns in order to submit their application. The FAFSA is paramount for students that are seeking financial aid to cover the cost of their higher education and can be a daunting process. Recognizing the challenges, the FAFSA Simplification Act (Act) was enacted into law with an intent to make the process easier, and thus, more accessible for students seeking financial aid.

The Act, signed into law as part of the Consolidated Appropriations Act of 2021 and amended by the Consolidated Appropriations Act of 2022, made important changes to the Higher Education Act of 1965 (HEA) and the FAFSA. Significant changes are being made to the impact need analysis as well as to policies and procedures for institutions that participate in Title IV programs.

The U.S. Department of Education (ED) has set forth a phased implementation, with full implementation required by July 1, 2024. Consequently, the 2024-2025 FAFSA is expected to be available in December 2023 (rather than October 2023) and will incorporate the new provisions provided for in the Act. 

The FAFSA Simplification Act makes changes to the FAFSA for the first time in 40 years and aims to streamline the application process, remove barriers for key student populations and expand federal aid eligibility. Notable changes to the FAFSA include the following:

Replacing the Expected Family Contribution (EFC) with the Student Aid Index (SAI)
  • The change in methodology used to determine aid removes the number of family members in college from the calculation, allows a minimum SAI of negative $1,500 and implements separate eligibly determination criteria for Federal Pell Grants.
Modifies the family definitions in FAFSA formulas
  • Changes in how a student’s family size is determined to align with student/parent tax return reporting.
Expanded access to Federal Pell Grants
  • The FAFSA Simplification Act expands Federal Pell Grant eligibility to more students and links eligibility to family size and federal poverty levels.
  • Incarcerated students will regain the ability to receive a Federal Pell Grant.
  • Lifetime eligibility will be restored to students whose institution closed while they were enrolled or if the institution is found to have misled the student.
Student no longer are required to register for the Selective Service to complete the FAFSA
  • However, this does not change the underlying Selective Service Requirements. It only removes the requirement as a condition of completing the FAFSA.
The FAFSA application will be translated into at least 11 languages
  • The current FAFSA is only available in English and Spanish.
Exempts applicants from disclosing assets that meet certain requirements
  • If one of the following conditions are met, the applicant is exempt from having to disclose financial assets:
  1. If income falls below the filing threshold,
  2. SAI between negative $1,500 and $0,
  3. The student (independent students) or their parents (dependent students) have an adjusted gross income less than $60,000 and do not file a tax return with schedules A-H or schedule C, or
  4. The student receives a means-tested benefit such as the Supplemental Nutrition Assistance Program.
Cost of attendance factors
  • The Act adjusts cost of attendance to include factors such as standard allowances for living expenses, whether on or off campus. In addition, the cost of obtaining a professional license or certification is no longer limited to a one-time allowance and private student loans are no longer included in the allowance for loan fees.

Awareness and understanding of the new FAFSA is a crucial first step towards addressing concerns about college affordability and advancing educational equity, especially for student populations who benefit most from financial aid.

Is your campus ready?

The FAFSA Simplification Act is intended to simply the process of applying for federal student aid for students and families. However, it’s happening at a time when many institutions are understaffed and unprepared to handle the forthcoming changes. To determine your institution’s readiness and identify gaps, ask these questions:

  1. Is the financial aid office up-to-date on all current regulations and processes? Are processes all automated and forms electronic? Are there delays in processing?
  2. What resources are needed to implement the new FAFSA? Temporary staff to consider include IT support, financial aid staff and project managers. Departments will likely need budgetary support for investments in staffing, system modernization and marketing.
  3. What is the timeline for implementing the new FAFSA? Engage students as early as possible with proactive outreach. Prepare technology and infrastructure to ensure your institution is internally prepared. The changes will impact not only the application process, but also verification and packaging.
  4. What is the plan for training? Training resources are available to help teams prepare. Check the ED’s website regularly for updates and the National Association of Student Financial Aid Administrators (NASFAA) website for recorded and live sessions.

Additional information can be found on the Federal Student Aid website.

Baker Tilly can help

Our specialized higher education team can help your institution prepare for and comply with the FAFSA Simplification Act. For more information, or to learn more about how we can help your institution, contact our team.

Michael W. Wascura
Digital tools: phone, computer and notepad
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