The Free Application for Federal Student Aid, aka the FAFSA, is the college financial aid form that students (and their parents) fill out typically in the fall before the next school year. For example, the financial aid you receive for this school year (2023-2024) is based on information provided when you completed the FAFSA form last fall – probably in October or so.
The coming 2024-2025 school year will usher in new changes to the Free Application for Federal Student Aid. The idea was to simplify the FAFSA form with fewer questions and expand financial aid to more lower income students, but some changes may result in less financial aid for many middle-income students and their families.
December is the new October. One important change is the date at which you can submit your FAFSA. In previous years, October 1 was the earliest date you could submit the FAFSA for the following school year. This year, December 1 will be the earliest date to submit the form.
This will give some parents more time to collect information and make changes to their finances prior to completing the forms. However, it may also tighten the schedule for applying for financial aid since some schools may have deadlines as early as January 1 (or sooner).
Parents of multiple college students will suffer. The amount of financial aid you might be eligible for is based on your financial need which is the difference between a school’s cost of attendance and a student’s EFC (or Student Aid Index – SAI – as it is now called).
Under the old rules, the number of students a family has in college affected the family’s Expected Financial Contribution, effectively cutting it in half. If your EFC was $20,000 with one student in college, it became about $10,000 with two students in college.
Under the new rules, the number of students in college won’t change a family’s Student Aid Index. In the example above, a family with one student had an EFC of $20,000; two students and the EFC became $10,000. Now the family’s new SAI will remain at $20,000.
If you weren’t getting need-based financial aid, this change doesn’t matter to you. However, if you are a candidate for need-based aid and have multiple kids in college, this change is significant. Now, even with two or more kids in college at one time, your “need” may not change.
Certain excluded assets are now included. Previously family farms and small business assets were exempt assets on the FAFSA form. You could own a 7-figure farm or business and were not required to report those assets on the FAFSA.
In a simple example, you could have been a small business owner with $100,000 (or any amount of money) in your business checking account and it would have been excluded on the FAFSA form. Going forward that will no longer be the case for families with incomes above $60,000.
The intent of the new FAFSA form was to make more financial aid from the Federal government available to more lower income students. However, if you are a family of modest means that would have received financial aid in the past, your future financial aid awards may be reduced under the new formula. In particular, families that receive institutional need-based aid (that is, financial aid from the school and not the government) and families with multiple college students may find their eligibility to receive financial aid reduced from what it might have been under the old formula.
To discuss any of the topics in this blog or to learn more about how we can help you Cross The Bridge To A Confident Retirement, please contact me through my web site mikebranch.net, call me directly at 651-379-3935 or email me at mpbranch@focusfinancial.com.