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The 2024/2025 FAFSA Changes: What You Need to Know
The FAFSA or Free Application for Federal Student Aid is undergoing some major changes for the 2024-2025 school year. Luckily, we broke down all of the new changes affecting the 2024-2025 FAFSA.
What is the FAFSA?
The FAFSA, or Free Application for Federal Student Aid, is an application that allows students the opportunity to obtain need-based financial aid at colleges and universities in the United States.
The FAFSA Simplification Act represents a significant change in the process used to award federal student aid beginning with the 2024-2025 award year.
Summary of the 2024/2025 FAFSA changes
Here are some summary points highlighting the major 2024/2025 FAFSA changes:
- The FAFSA will be available in December of 2023 which is months later than usual
- The number of questions will be reduced from 108 to 36
- The questions on the FAFSA will align more with federal income tax returns
- An increase in aid eligibility for single parents
- A decrease in aid eligibility for middle and high-income families
- Reduce the likelihood of verification
- New Federal Pell Grant formula
- Everyone will need an FSA ID to complete the FAFSA application
- Student can list up to 20 schools on the online FAFSA application
Here are some name changes for the 2024/2025 FAFSA:
- Expected Family Contribution (EFC) is now Student Aid Index (SAI)
- Simplified Needs Test (SNT) is now Applicants Exempt from Asset Reporting
A deeper dive into the 2024/2025 FAFSA changes
Increase in Financial Aid for Single Parents
There are two types of single parents according to the new FAFSA. This includes dependent students with just one parent or independent students who are single parents.
There will be a bigger increase in the Income Protection Allowance (IPA):
- Parents – Increases by 20%
- Most students – Increases by up to $2,400 (35%)
- Students who are single parents – Increases by up to $6,500 (60%)
There will be a greater eligibility for the maximum Federal Pell Grant:
- Single parent – Adjusted Gross Income (AGI) less than or equal to 225% of the poverty line
- Not single parent – AGI less than or equal to 175% of the poverty line
Less Aid for Multiple Children in College
With the new FAFSA changes, the number of children in college at one time will no longer be considered for need-based financial aid. Next year, the parent contribution will no longer be divided by the number of children in college at the same time. The income protection allowance will no longer be reduced based on the number of children in college at the same time. However, families can still appeal for more aid based on having multiple family members in college at the same time.
For example, on the 2023/2024 FAFSA, if a family had two members in college and had an expected family contribution of $10,000, then that total was split in half between the two-college attended individuals. However, under the new FAFSA formula, that contribution would be for each family member in college, making the total $20,000 rather than $5,000 per child. This can increase the financial burden for families with more than one member in college.
Student Aid Index (SAI)
The Student Aid Index (formerly known as Estimated Family Contribution) is a number that determines each student’s eligibility for certain types of financial aid. A student’s SAI is calculated using modified need analysis formulas. These formulas use information that applicants provide on the FAFSA.
The analysis formula has gone through significant changes including:
- Removal of the number of family members in college at the same time
- The possibility for the SAI to be a negative number with a minimum SAI of -1,500 rather than 0
- Elimination of alternate EFCs for enrollment for a period other than 9 months
- Elimination of the Simplified Needs Test (SNT) and Auto-Zero calculations
Changes in Reportable Income
Many types of untaxed income will no longer need to be reported on the FAFSA
- Cash support and other money paid on the student’s behalf
- Veterans education benefits
- Workman’s Compensation
There will be an elimination of cash supports yields certain benefits
- Gifts to the student will no longer be reported as untaxed income
- Qualified distributions from 529 plans that are owned by a grandparent, aunt, uncle will not affect aid eligibility
Changes in Reportable Assets
There are significant changes to the asset contribution components in the SAI formula:
- Assets now include the annual amount of child support received
- The net worth of a business is no longer limited to those with more than 100 full-time employees. Meaning, applicants will be asked to report the net worth of all business, regardless of the size of the business
- Farm owners will now have to include the value of a family farm, including the fair market value of land, buildings, livestock, unharvested crops, and machinery actively used
- For dependent students, education savings accounts will only be counted as a parental asset if the account is designed for the student
Applicants Exempt from Asset Reporting (previously known as the Simplified Needs Test)
- Changes in income thresholds
- Changes in means-tested federal benefits
Auto-zero is no longer a part of the FAFSA. Therefore, replacement for auto-zero EFC includes:
- If a dependent student’s parents or an independent student (and spouse) are not required to file a federal income tax return then the SAI (Student Aid Index) will be negative $1,500
- Federal financial aid cannot exceed the cost of college, this negative score can be used to distinguish among the neediest students to ensure that states and colleges accurately target students who require the most need-based aid
- The SAI (Student Aid Index) set to zero if the student qualifies for maximum Federal Pell Grant
Asset Reporting Exemption
Applicants Exempt from Asset Reporting
- Income threshold for disregarding assets will be increased from $50,000 to $60,000
- If anyone in the applicant’s household received certain means-tested federal benefits in the last 2 years, there will no longer be an income threshold
- Means-tested federal benefits include: SSI, SNAP, TANF, WIC, Medicaid, and Federal Housing Assistance
- Free and reduced price school lunch has been dropped from the list of means-tested federal benefits
Households with one parent
When parents are divorced, separated, or never married and do not live together, only one parent must complete the FAFSA. This parent should be the one who provides more financial support to the student not based on where the student lives the most.
If this parent has remarried as of the date the FAFSA is filed, the stepparent’s income, assets and dependents must be reported on the FAFSA.
Definitions of family size has changed
- Family size is the student, parent, dependents from tax return (qualifying child, qualifying relative)
- Financial aid does not count as student’s self-support
IRS Definition of Dependent
Dependents include qualifying children and qualifying relatives.
- Must live with the parent for more than half of the year
- Must not provide more than half of their own financial support
- Financial aid no longer counts as part of the student’s self-support
- Must be under age 19 (24 if full-time student)
- If the child is married, they must not file a joint return with their spouse
- Dependents may include other people if they live with the parent and receive more than half their support from the parent
Cons to the FAFSA changes
- The “sibling discount” is ending which makes it more expensive for families with more than one child to send kids to college
- The FAFSA is opening later this year than it traditionally has in the past. Be sure to check your state and college deadlines which may also be impacted
- Families earning $60,000 in adjusted gross income who own farms or small businesses employing fewer than 100 workers will need to include these assets in their FAFSA, which could reduce their financial aid
Pros to the FAFSA changes
- The application has fewer questions making it clear and more concise to fill out!
- Lower-income families will be eligible for more aid under the new formulas
- Pell Grants are granted automatically based on income and household size
- Family contribution amounts could be as low as -$1,500 instead of 0
How to prepare for the 2024-2025 FAFSA application
All of the new changes coming to the FAFSA can be extremely overwhelming, therefore it may be a good idea to take the steps below to help students and parents prepare before the FAFSA opens.
Obtain an FSA ID
Student and parent, or for students who are married, student and spouse, can obtain FSA IDs before the FAFSA opens, so that can be one less thing to worry about!
Determine your dependency status
Knowing if you are an independent or dependent student prior to completing the FAFSA can help save you time because you will know which sections of the form to fill out. Additionally, it will allow you time to tell your parents or guardians that they will need to fill out the form as well.
Be aware of the December launch date!
Now that you are well prepared to answer the FAFSA questions, make sure you do not miss the first day that the FAFSA is open! Remember, completing the FAFSA early will allow you to obtain financial aid first and ensure your chances are the best for receiving generous financial aid!
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Frequently asked questions about the 2024/2025 FAFSA changes
Can I save what I have and come back later when filling out the 2024-2025 FAFSA?
What year of income information is required on the 2024-2025 FAFSA
What are considered assets and what are not?
When will I receive my financial aid offer?