Major FAFSA Changes Are Coming – Are You Ready?

Wed, August 30, 2023 11:30 AM

If you haven’t heard, there are MAJOR CHANGES coming to the FAFSA (Free Application For Federal Student Aid) this year which is the online financial aid form you complete to qualify for federal financial aid – and so I am going to give you a brief synopsis of the many changes coming to this important form – let’s get started.

First, the Acronym changes:

Expected Family Contribution (EFC) has been changed to Student Aid Index (SAI) – it is still the annual amount a family will have to pay to send their child to whatever college they are going to – just a new name – and this new name is supposedly easier for the consumer to understand – you tell me.
All families with few exceptions will be required to use the FADDX (Future Act Direct Data Exchange) formerly the IRS Data Retrieval Tool to download their Federal Tax Return.
Simplified Needs Test for students with super low SAI’s is now called Applicant Exempt From Asset Inclusion – this is actually a little clearer isn’t it.

Second, the GOOD news:

The number of questions has been reduced from 108 to 36 – love it!’
Grandparent owned 529 Plans are no longer included as income t0 the child when a distribution takes plan.
Child support is no longer considered income at 22 to 47% – instead, it is considered an asset at 5.64%.
Sibling owned 529 Plans or college savings plans are NOT counted in the calculation anymore.
Students can earn $9,000 without any impact on financial aid.
Students can now have a -$1,500 SAI amount which will lead to more Pell Grant money – which has been increased.

Third, the BAD News:

They have ELIMINATED the Multi Student Discount – this is a terrible blow to families who have multiple kids in college at the same time and qualify or hoped to qualify for financial aid. This means families with multiple kids in college will have the same SAI amount for every child. For example, if a family’s EFC (now SAI) was $50,000 and they had two kids in college at the same time, the SAI amount would be split in about half for each – NOT any more. Both kids will have a $50,000 SAI!
Divorced parents must go with the parent who provides the most financial support for the child – not the one who lived with them at least 51% of the time in the last 12 months.
All business owns MUST provide a value for their business regardless of the number of employees they have. This includes farmers, small business owners, investment property owners – who might have been exempt in the past – ouch.
Co-op earnings students make while in college are now added into the calculation.
They have not increased the amount a student can take out in Federal Direct Student Loans – it is the same $5,500 as a FR, $6,500 as a SO, $7,500 as a JR and SR.

One thing has remained the same – or did it?

One parent and the student will still need to setup an FSA ID – ASAP, so that you can login into the FAFSA and electronically sign it at the end. But – the process of getting into and competing the FAFSA has been modified– students will have to give permission to their “Contributors to the FAFSA” – that’s you mom or dad or anyone else who is helping them with it – to complete their section.

And finally, due to the change to the software – release of this year’s FAFSA is going to be delayed until sometime in December (it used to open on October 1^st). That’s right, they can’t tell us exactly when it will be released but I can assure you – since I have been helping families with their FAFSAs for 17 years, that as soon as they release it, there is going to be a scramble by everyone trying to jump in and complete their FAFSA and as in the past – the system will likely crash. Patience will pay off.

Confused – have questions – need guidance on completing your financial aid forms – I can help! Schedule a FREE Discovery Zoom Meeting with me TODAY!