The FAFSA Simplification Act (the Act) introduces the most significant changes to the FAFSA and student financial aid processing in over 40 years. A number of the provisions of the FAFSA Simplification Act have already been implemented, but the majority of the provisions of the FAFSA Simplification Act will impact the 2024-25 award year.
The link to the Dear Colleague Letter on the FAFSA Simplification published on August 4th, 2023 can be found here. The link to the recent Electronic Announcement on key terms and definitions for the FAFSA Simplification Act published on August 7th, 2023 can be found here. Training slides and presentations on FAFSA Simplification published by ED can be found here. Lastly the National Association of Student Financial Aid Administrators (NASFAA) has established a FAFSA Simplification Web Center that includes a number of helpful resources for navigating these upcoming changes.
The FAFSA Simplification Act was enacted into law as part of the Consolidated Appropriations Act of 2021, and as amended by the Consolidated Appropriations Act of 2022. A number of the provisions of the FAFSA Simplification Act have already been implemented, but the majority of the provisions of the FAFSA Simplification Act will impact the 2024-25 award year. In connection with the upcoming significant changes, the US Department of Education (ED) has provided multiple training opportunities over the last two months and has recently published a Dear Colleague Letter (GEN-23-11) FAFSA Simplification Act Changes for Implementation in 2024-2025 and an Electronic Announcement (GENERAL-23-63) Key Terms, Definitions, and Systems Related to FAFSA Simplification and FUTURE Acts.
The most significant changes that have already been implemented include the following:
For the 2024-2025 award year, the Act requires that the Expected Family Contribution (EFC) be replaced with the Student Aid Index (SAI). The SAI is the number that will be utilized in determining a student’s Pell grant eligibility as well as will be included in the student need calculation for determining the student’s federal loan eligibility. The SAI will be determined using inputs from the student’s FAFSA which will primarily come directly from federal tax information (FTI) that will be retrieved directly from the IRS. One difference for the SAI compared to the EFC is that the minimum SAI can be -1,500 instead of zero.
A student’s SAI will be determined by determining the type of student (dependent, independent without dependents, and independent students with dependents) and then utilizing the appropriate formula using the FAFSA income data. Certain untaxed income items have been eliminated from the need analysis such as housing, food, and living allowances paid to members of the military and clergy and veterans noneducation benefits. Certain allowances against income have been eliminated such as cooperative education employment earnings, child support paid, combat pay, and the state and other tax allowance.
One of the more significant changes is that the Income Protection Allowance (IPA) will no longer account for the number of family members in college. ED believes that as the IPA has been increased this will help to offset the removal of the number in college allowance. NASFAA has developed a tool to help financial aid administrators determine if current or prospective students would have an increase or decrease to the SAI as compared to the student’s existing EFC. Institutions may use professional judgment to adjust other data items related to COA or SAI that reflect costs associated with additional family members enrolled in college.
Beginning with the 2024-25 award year, otherwise dependent students who indicate that they have unusual circumstances that prevent them from providing parent data will no longer receive a rejected application but will instead have their application processed with a provisional independent status. The term “estimated financial assistance (EFA)” was replaced with “other financial assistance (OFA)”. Therefore, a student’s financial need will be determined by taking the Cost of Attendance (COA) less the OFA less the SAI.
The calculation of a student’s Pell award will change significantly for the 2024-25 award year. The student will no longer have a 9-month EFC that determines the student’s award using an established Pell payment chart based on enrollment status (Full-time, ¾, 1/2 , less than half-time) and COA. Instead the student’s Pell grant will be calculated in one of three ways:
Maximum and Minimum Pell Grant eligibility are determined based on tax filing requirement, family size and composition, poverty guidelines, and state of residence. The Max Pell and Min Pell students will be identified on the students Institutional Student Information Record (ISIR) generated after the completion of the FAFSA. The Pell award calculated must be adjusted for enrollment intensity which will require the institution to calculate the student’s enrollment for a period of enrollment as a percentage of the standard full-time enrollment. Therefore, if standard full-time enrollment is 12 hours and a student was enrolled in 9 hours, the student’s enrollment intensity would be 75% and the student’s award for that term would be the student’s annual Pell award divided by 2 multiplied by 75%. Additionally, the use of enrollment intensity eliminated the requirement for a student to have half-time enrollment in which they received more than 100% of their Scheduled Award.
At RubinBrown we realize this is a time for significant change, especially for those in the financial aid profession. We have experience in providing consulting services related to student financial aid best practices and compliance evaluations. We also have teams that specialize in ERP implementation and technology changes. Please feel free to reach out to us if you need additional assistance in the implementation of the FAFSA Simplification Act or need additional guidance on other Title IV compliance topics.
Published: 8/16/2023
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