Yesterday marked the end of the public comment period on the revised Free Application for Federal Student Aid. The form is traditionally available Oct 1st but given what the Department of Education called the “most ambitions and significant redesign…in decades” we shouldn’t expect to see it until Dec.
One of the main goals of the overhaul was to make it simpler. The draft version has 46 questions down from the current 108.
Highlights include:
- “Expected Family Contribution” will be called the “Student Aid Index.” The formula projects how much a household can afford to pay prior to financial aid.
- The multiple-child discount will be eliminated as retired Senator Lamar Alexander believed it wasn’t fair to households with one child in college or who spaced their children farther apart.
- The exemption for small-business owners and family farms will be eliminated. Previously these folks could exclude their business and farm assets as long as they did not employ 101+ full-time workers. This change is expected to be quite punitive.
- In divorce situations child support will be reported as an asset rather than income increasing financial aid odds as assets are treated favorably relative to income.
- In another divorce related change the new formula requires the parent who has spent the most money on the child to complete the FAFSA. Previously it was the custodial parent. This is a negative financial aid impact as typically the parent spending the most has great financial means.
- Beginning with the 2024-2025 school year qualified distributions by grandparents, uncles/aunts, etc will no longer be taxed as a child’s untaxed income at the traditional 50% assessment.
- The aid formula will become more generous to lower-income students. An additional 555,000 students will become newly eligible for the Pell Grant and 1.7 million will be able to qualify for the max ($7,395 for the 2023-2024 school year).