This article will:
- Tell you why filing the Free Application for Federal Student Aid (FAFSA®) is important no matter what your family income may be,
- Discuss the Academic Year 2023-2024 FAFSA® form, and
- Outline the likely changes to the FAFSA® form to be used in 2024-25
To get an estimate of the amount of financial aid you might be eligible to receive, skip ahead to this free Financial Aid Estimator.
The Current FAFSA® Form
On October 1, the Free Application for Federal Student Aid (FAFSA®) becomes available for high school seniors and college students enrolling for Academic Year 2023-24. It may feel like the current school year just started, but colleges are now in full marketing mode attempting to attract next year’s freshman class. A key part of their evaluation for financial aid: the FAFSA®.
The process is fairly cut and dried: No FAFSA®, no federal aid. No Federal Direct Student Loans. No Pell Grants. No Work-Study, or any other federal student aid program. Students MUST complete the FAFSA® to be eligible for any of those federal aid programs, it’s as simple as that.
TIP: Don’t rush through filling out the FAFSA®, but be sure to complete it as soon you can do so accurately. Students applying Early Decision or Early Action need to pay particular attention to the deadlines to ensure that they are considered for financial aid as well as admission. Some financial aid is awarded on a first-come, first-served basis, making it advisable to file a well-prepared FAFSA® sooner rather than later.
Understanding the Process and Who is Involved
The federal government as well as colleges and universities predominantly deal with students, not parents, in the college admission and financial aid processes. Be sure that filings are done using the student’s information, including their social security number and other required data. Information about parents should be provided only when specifically requested.
Here are some helpful resources provided by the U.S. Department of Education to assist you in better understanding the FAFSA® filing process:
Once the FAFSA® is filed, the student will receive a Student Aid Report (SAR), which will also be sent to colleges. The SAR will note the family’s Expected Family Contribution (“EFC”) – the calculation which estimates how much the government thinks a family should contribute to a student’s education. That EFC figure is neither the price of college in general nor the final determination of what a particular college will cost a family. It is rather an index used to determine how much financial aid a student may be eligible to receive and, consequently, how much a family might be expected to contribute after the aid package is awarded. If the EFC seems high, double-check inputs to be sure that there aren’t any errors. If errors are uncovered, correct them immediately and let the college know of the error(s).
The SAR will also indicate your estimated eligibility for Federal Pell Grants and federal student loans. Based on the SAR, the federal government determines financial need and allocates grants to students with financial need. Colleges, similarly, use the SAR to award their own need-based grants and scholarships, a.k.a. Institutional Awards.
- IRS Data Retrieval Tool: Family income is a key factor in determining eligibility for federal financial aid. The FAFSA® form requires information from a family’s tax returns filed two years prior to the Academic Year for which a student is seeking federal financial aid. Students filing for financial aid for the next Academic Year (2023-24) must use tax information from the tax year 2021. To make this easier, the Department of Education now has a link to those tax forms via the IRS Data Retrieval Tool.
- Free EFC estimator: The FAFSA® collects information about various aspects of the student’s and parents’ situation including, but not limited to, their income and number of students attending college. That data is fed into a calculation that produces the family’s Expected Family Contribution (EFC) using a formula established by law. Most undergraduates are dependent students for this purpose and are required to report their parents’ income in addition to their own. If parents are separated or divorced, the custodial parent must provide their income data for FAFSA® filing purposes. Use this free EFC Estimator to estimate your family’s Expected Family Contribution.
Do you need to file the CSS Profile?
Some 300 private colleges and universities also require students to file a second financial aid form known as the CSS Profile, administered by the College Board. Free for families who make up to $100,000 a year, the CSS Profile also becomes available on October 1 and helps to determine a student’s eligibility for institutional financial aid. You can learn more here about the CSS Profile and the participating schools that require it.
Watch those deadlines!
Some colleges require that the FAFSA® and CSS Profile forms be filed around the same time as their Early Decision and Early Action applications are due. As these dates can vary by college, be sure you know the relevant deadlines well in advance. Missing financial aid deadlines, even by a day, will likely result in a student not being considered for aid.
Many states provide need-based grant programs to low-income students based on data provided on the FAFSA®. While the FAFSA® is available beginning October 1, not every state will have passed their grant budgets for the 2023-2024 Academic Year by that same day. Be aware of any financial aid awards relying on estimates for state-based funding as they may be subject to change based on final state budget legislature.
Institutional Awards are funds reserved by the college and distributed based on their own internal criteria and methodology. Eligibility requirements and deadlines can vary from school to school. Make sure to identify any deadlines for institutional funding to stay ahead of the curve.
Future changes anticipated for the 2024-25 FAFSA® Form
The proposed changes to the FAFSA® discussed below will affect the:
- High school class of 2024 (this year’s junior class),
- College students who will be in their freshman, sophomore, and junior years of college, and
- Returning graduate students
In 2020, Congress passed the FAFSA® Simplification Act which made some key changes not only to the current FAFSA® form itself but also to its underlying processes and methodologies.
Some of these changes include:
- The Expected Family Contribution (EFC) name will be amended to the Student Aid Index (SAI). Like the EFC, the SAI formula will be used to calculate eligibility for need-based aid programs once the FAFSA® is completed. Cost of Attendance minus SAI = Financial Need. However, changes to the formula factors can allow for the new SAI to be as low as -$1,500 compared to the EFC’s bottom threshold of $0, a differentiation that could help schools more precisely target aid for low-income students.
- The Income Protection Allowance (IPA) levels, which shield a portion of parents’ and student’s income from the estimated contribution calculation, will increase, protecting a larger amount of that income and effectively reducing the amount of income considered in making that calculation under the SAI.
- The FAFSA® amendments eliminate the former policy whereby families with two or more children enrolled in college simultaneously could reduce their EFC by dividing their expected contribution by the number of family members enrolled. This means, moving forward, that each student from the same family with multiple members enrolled in college will have the same parental contribution as that of a student from with identical family parameters but only one member enrolled.
- The new FAFSA® will be shortened to under 40 questions from a current 108 questions.
- For divorced or separated parents, the parent required to provide information on the FAFSA® will now be the parent providing the “most financial support” to the student, instead of the parent with whom the student resides. This will be based on financial support provided during the second preceding tax year.
- Students will no longer be required to report “money paid on the student’s behalf” on the FAFSA®, meaning distributions from a grandparent-owned 529 plan, for example, will no longer be considered as untaxed student income as part of the SAI. This is an important distinction as the FAFSA® previously counted support from friends and extended family members as a portion of student income towards calculation of the EFC.
- Other rule changes relative to the FAFSA® expand student access to aid by eliminating prohibitions for students with certain drug-related offenses and for those who failed to register for the Selective Service, as well as establishing procedures to more effectively determine someone’s independent status as a homeless student or foster youth.
The Last Word
The process of applying to college also requires families to file the pertinent information necessary to receive financial aid. Being aware of the details of that process as well as significant changes on the horizon can help families not only prepare for the often inconvenient part of completing all the required forms by a specific deadline, but also consider a strategy, either on their own or with assistance from a financial professional, well in advance that will ensure their student(s) have access to all of the federal aid for which they are eligible.