Financial Aid, Another shake up is on the horizon

 

by Katherine O'Brien, MA CCPS, founder of Celtic College Consultants

With some colleges costing more than $90,000 per year, more families need financial help than ever before. A few years ago, Congress passed a law which has been incrementally been implemented. The final major shift is due to be incorporated into the FAFSA for the 2024/2025 school year. Major changes are coming.

24/25 FAFSA will not be available until December 2023

Because the Department of Education had to completely re-write the processor, the FAFSA will NOT be available October 1, as in recent years. This is how it used to be. Until recent changes, professionals like myself used to work every New Year's Day filing FAFSA forms. This year we will likely see a reprise of that activity.

As of yet, schools with ED (Early Decision) application programs have not stated how they plan to handle this situation. ED applicants must sign a contract as part of their application. If they are accepted by their ED school, they agree to withdraw all other applications and attend their ED school. These schools typically require the CSS PROFILE form so can use that information to create an initial offer of financial aid for these students. Should your teen decide to apply ED, be sure to read all the fine print.

The EFC is being replaced by the SAI

The EFC (Expected Family Contribution) is the number calculated by the former FAFSA formula. Colleges could not award aid exceeding the difference between the COA (Cost of Attendance) and the EFC. The FAFSA formula has been significantly modified and, in some ways, simplified. The SAI (Student Aid Index) will replace the EFC. The SAI can be negative; the minimum EFC was $0. The lowest SAI is -$1,500.

Major changes have been made to the FAFSA Formula

1. The value of businesses and farms are now included. Previously, businesses with fewer than 100 employees were not included as an asset on the FAFSA. Moving forward, ALL businesses and farms will be included. Details about how to value a business have not yet been provided.

2. Non-taxed income will no longer be considered. This is a MAJOR change. Gifts from grandparents and others, child support payments will NOT be reported as income. Income is assessed between 25% and 47%. Child support payments received will now be considered as an asset and assessed at 5.65%.

3. There will be no asset questions for students eligible for free or reduced price lunch programs, whose parents' AGI is less than $60,000 AND their return includes no lettered schedules, and for students whose parents' AGI is less than $60,000 and their only lettered schedule is schedule C and it shows a gain or loss of less than $10,000.

4. Family size will depend on income tax dependents. If your situation is different, or not accurately reflected by the number of dependents on your return, you will need to notify the financial aid office(s) and ask them to take it into consideration.

5. The number of students in college is no longer considered by the formula. However, several other changes to the formula have been made. Experts in this area have been running test cases and have determined that the SAI is not much different for families with two in college. There are, however, significant differences for those families with three or more college students. If this is your situation, do notify the financial aid offices for all of your student children and ask them to consider that fact in your situation. THIS CAN BE CONFUSING; the question about the number of students in college remains on the form, despite it no longer being part of the formula. Please note that the inclusion of this information on the FAFSA form enables colleges to use this information in their process of allocating their institutional funds. The FAFSA formula/SAI is only required for the distribution of federal funds (Pell, SEOG grants, federal loans, etc.)

6. The housing choice question has been removed from the FAFSA. This is odd; colleges do need this information. Expect to see it on the application for admission and/or other forms required by the colleges.

7. The new FAFSA includes optional questions on race and sex. These are for statistical purposes only and will NOT be sent to the colleges. This information will only go to the Department of Education.

8. For students whose parents are divorced, the determination of who their parent is, for inclusion on the FAFSA, has changed slightly. Previously it was the parent with whom the child resided most of the time. It is now the parent who provides the most financial support for the student. If that parent is married, both the parent and his or her spouse's income will be considered, while the other parent (and his or her spouse, if applicable) income will not be reported nor considered. Be aware that most of the colleges using the CSS PROFILE form do require the "non-custodial" parent to also provide income and asset information. 

Keep in mind that the PROFILE form is a completely separate form and process. The PROFILE information is used by colleges to allocate their own institutional aid.

9. Verification will not be randomly selected. Over subsequent years, as the Department of Education (DOE) accumulates data, it is likely that those with certain situations will be more likely to be verified (audited). As more data is gathered, the DOE identifies the situations most likely to be erroneously reported on the form.

10. Pell grant qualification is going to change. Many families currently receiving Pell grants, including some receiving full Pell grants, will no longer be eligible. This is particularly true for farmers and business owners. At the same time, it is expected that many more families (about 2/3 of FAFSA filers) will be eligible for Pell grants. There is significant discussion between financial aid officers regarding how to make up the shortfall in funding dollars for these newly qualifying students. It is considered likely that a number of colleges will not be able to bridge this gap, making college unaffordable for even more students.

There are more changes. These are the most significant of them, and the ones that will impact more families.