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Planning to Fill Out the FAFSA? 5 Recent Changes to Know

26 Aug 2021 by: Sheila Hoopes 

It’s never too early to start thinking about paying for college and filling out what many families rely on, the FAFSA. 

What is the FAFSA?

FAFSA, which stands for the Free Application for Federal Student Aid, provides access to all federal money for college, including loans, work-study opportunities, and grants. To be considered for federal student aid, you can apply as early as October 1 of the year before the student plans to attend college. While the application process is open until the following June 30, many states and individual colleges have their own deadlines, so students are encouraged to apply as close to October 1 as possible to avoid missing out on available aid.  

Upcoming FAFSA Changes in 2022 

What many people might not have noticed is that Congress included some sweeping changes to the FAFSA and financial aid rules as part of the federal pandemic relief legislation that passed over the December 2020 holidays. The ultimate intent was to simplify the process and increase access to college, as many students were not completing the FAFSA and thus leaving money on the table. However, the modifications will not benefit all families. These changes will apply for the 2023-2024 school year, thus affecting people completing the FAFSA as early as October 1, 2022.

Five Major Changes to the FAFSA

  1. The new FAFSA application will go from about six pages to two pages in length, with the number of questions reduced from 108 to about 36.
  2. The FAFSA has been changed to better align with tax returns; an IRS data retrieval tool can be used by students and parents to upload tax returns and transfer data directly to the FAFSA form. 
  3. The term “expected family contribution” (EFC) has been replaced with “Student Aid Index” (SAI). A college or university will subtract a household’s SAI from the cost of attending its school to determine how much financial aid the student will receive. 
  4. Certain sources will no longer count as income, which should be favorable to aid seekers as these sources will not reduce aid eligibility, including:
    • Veterans and workers’ compensation
    • Gifts to a student
    • Distributions from a grandparent-owned 529 plan (previously considered as taxable income to the student)
  5. Families that receive financial help for college costs from grandparents or others outside the immediate family will no longer have to report this help on the FAFSA.

Family Situations to Consider

While the legislation may have intended to ease the FAFSA process by aligning the application with IRS tax rules, it will definitely make things more difficult for some families. For divorced parents, the parent who provides the most support will now be required to complete the FAFSA. This could make college more expensive for many divorced families, and parents with a multiple support agreement may need to plan in advance about who is claiming the child on their tax return for those years that affect whether the child gets financial aid. 

For households that will have two or more children in college at the same time, the FAFSA will no longer split the amount parents contribute to college by the number of students attending college at once, eliminating the “break” parents with more than one student enrolled in college used to receive from their expected family contribution. 

This is just a summary of the student aid legislation and more is still to be determined on the effect of its passing and how stakeholders will react to these changes. Every family’s situation is different and if you have questions or concerns about how this recent legislation will affect your financial future, please contact us, and we’ll be happy to help guide you.




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