FAFSA overhaul could raise costs for some students
Some families will benefit from the changes, while others face an unexpected rise in college costs
An overhaul in how Federal student aid is calculated means many students may be getting more money for school, but some families could pay more, according to recent reports. (iStock)
The Free Application for Federal Student Aid (FAFSA) makeover aimed at streamlining the application process and altering the formula for eligibility, could also mean that some families may be facing extra costs, according to two recent reports.
The FAFSA simplification act overhauls the application process for student aid. Changes to the financial aid eligibility formula from Expected Family Contribution (EFC) to the new Student Aid Index (SAI) and a more streamlined form that reduces application questions to roughly 40 questions, down from 100, are among the many updates families can expect. The changes will take effect in July, in time for the 2024-25 academic year.
For middle-income families earning less than $70,000 with more than one child in college, it could mean paying more tuition as the sibling discount is eliminated under the new formula for calculating aid, according to a recent Brookings report.
"These changes, and others, will have profound effects on students’ eligibility for financial aid," Brookings said. "Some students may pay more and others less. How a student’s financial aid eligibility will change with FAFSA simplification depends on many factors, including their family’s financial circumstances, where they attend college, and especially how many siblings they have in college."
If you are currently in school or starting soon, and you need more financial aid than what you can receive through FAFSA, consider taking out a private student loan while interest rates are low. Visit Credible to find your personalized rate without affecting your credit score.
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Some families will pay less, others will pay more
The shift to SAI calculation formula will impact the size of students’ Pell Grants – these grants don't need to be repaid – and the amount of additional institutional financial aid that colleges and universities can provide.
The new formula means that families with incomes of $70,000 applying for aid for one student will maintain their eligibility and receive small Pell Grants. Under the previous formula, families at this income level would not be eligible for the grant. Students in this income range will also become eligible for roughly $2,000 more institutional grant aid, according to Brookings.
However, the changes also mean that families with more than one student could see costs increase, according to an Econofacts report. That’s because the new formula for calculating aid based on SAI no longer considers how many siblings are attending college simultaneously. This could be a problem for families who save for college and university costs based on the EFC formula.
"Large numbers of students are about to experience changes in what they pay to attend college," Econofacts said. "Students without siblings in college will gain eligibility for financial aid because of FAFSA simplification. They will receive greater Pell Grant funding and they will become eligible for more institutional grant aid. This group, representing roughly two-thirds of students, will benefit from the law change with greater eligibility for financial aid.
"Students with siblings in college will have a different experience — with some potentially experiencing a sizable, unexpected increase in cost," Econofacts continued.
If you have filed for your FAFSA aid but need additional funding for school, consider taking out a private student loan. Visit Credible to compare multiple student loans at once and find the one with the best interest rate for you.
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Financial aid offices unprepared for changes
Only 28% of financial aid offices said they are on track to implement the updated FAFSA, according to a recent National Association of Student Financial Aid Administrators (NASFAA) survey.
Of the survey respondents not yet ready to implement the FAFSA, 59% said the lack of time and 58% said lack of guidance from the Department of Education was the most significant barrier to successful implementation.
Additionally, of the financial aid offices surveyed, 56% said that the requirement to report Federal Work-Study earnings to the Department of Education would place more burden on financial aid offices, including 48% said the same of the change to the treatment of multiple family members in college and 42% highlighted the federal authority to regulate the cost of attendance as a complicating aspect of the new form.
"Financial aid professionals are often the first responders when students and families have questions about paying for college, and with such monumental changes to student aid eligibility and the FAFSA looming, they need to be well-prepared to ensure a smooth transition and well-versed in communicating how those changes will impact their students," NASFAA President and CEO Justin Draeger said in a statement. "What the financial aid community needs now are clear timely training opportunities and a transparent implementation roadmap between now and when the 2024-25 FAFSA will go live."
If you have filed for your FAFSA aid but need additional funding for school, consider taking out a private student loan. Credible can help you compare multiple student loans at once and find the one with the best interest rate for you.
INFLATION AND RISING COSTS PUSHES AMERICANS TO MAKE RISKY FINANCIAL CHOICES: SURVEY
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