Parents start worrying about how to pay for college from the moment their kids are born. Considering a four-year education at a private school generally tops $100,000, it’s a legitimate concern. Even parents who are successful, invest wisely and take a proactive approach to education planning may need to help their kids access federal aid in order to afford college. Getting financial aid starts with filling out the FAFSA (Free Application for Federal Student Aid). It’s a notoriously time-consuming application to complete—but recent changes to the FAFSA should help parents with college-bound teens save time.
The FAFSA Simplification Act (FSA) was included as part of the Consolidated Appropriations Act when it was passed in December 2020. The FSA was designed to accomplish several things, including making it easier for families to apply for aid and changing the way eligibility decisions about financial aid are made. Most provisions created by the FSA will be implemented starting on July 1, 2023, though some won’t take effect until the 2024-25 school year.
What’s Changing with FAFSA?
Will any students in your family be applying to college in the next few years? If so, here’s what you need to know about the changes created by the FAFSA Simplification Act.
A new formula determines a student’s level of need. The FSA replaces the Expected Family Contribution (EFC) with the Student Aid Index (SAI), which is essentially the formula used to determine a student’s family’s ability to pay for college. The new formula uses less information than the EFC and largely benefits low-income families. One change may negatively affect families with multiple college students. The SAI doesn’t take into account how many students a family has in college like the EFC did. If you’re already paying for an older child’s tuition, that financial burden won’t help your younger child qualify for aid.
Applying should get easier. For many families with college-bound students, the simplification of the FAFSA form itself will be the most relevant change created by the FSA. Parents who have helped older kids complete the application, or who remember filling out their own financial aid forms, may recall that the FAFSA asks a number of questions about the parents’ finances including about their taxed and untaxed income and the current value of their investments and businesses.
Because of the shift to the SAI, it’s anticipated that the FAFSA form will include fewer questions. Parents will also be able to consent to having the IRS share their tax information with Federal Student Aid instead of having to provide tax information on the FAFSA. This change won’t happen until the Fostering Undergraduate Talent by Unlocking Resources for Education Act (FUTURE Act) is enacted, amending the Internal Revenue Code. The FUTURE Act was passed in 2019 but there’s no word on when it will take effect.
In short? The 2022-23 FAFSA form looks just about the same as it has in past years, but it should be getting simpler within the next few years. However, parents may still have to do some digging through their accounts—or speak to their financial advisors—to gather some necessary financial information for a child’s FAFSA.
Past drug-related offenses won’t disqualify applicants. The FAFSA asks whether the applicant has been convicted of selling or possessing illegal drugs, and whether male applicants have registered with the Selective Service System (aka the draft). In prior years, reporting a drug-related conviction or failing to register for the draft would disqualify a student for financial aid. The FSA removes those consequences. (The questions are still included in the 2022-23 FAFSA but students won’t be penalized for their answers.)
Access to Pell Grants is expanded. Federal Pell Grants help financially needy students afford undergraduate education and don’t have to be repaid. The FSA helps more people qualify for these grants (including incarcerated students) and allows the neediest students to automatically qualify for the maximum grant amount.
The “150 percent rule” is repealed. For students who receive need-based Direct Loans, something called the Subsidized Usage Limit Applies (SULA) restriction put a cap on how many credits they could take before losing financial aid. Eligibility would expire when the student went beyond 150 percent of the program length. So, a student enrolled in a four-year bachelor’s program requiring 120 credits would lose access to financial aid if they took longer than six years to complete the program or took more than 180 credits. The FSA has repealed this rule.
If you have a high school student who’s preparing for college, it’s generally advisable that they submit the FAFSA even if you anticipate being able to afford their tuition. Financial circumstances can change quickly, and your family may qualify for aid even if you’re well off. Considering how much college costs, you don’t want to miss out on any financial resources that will help you afford it. Plus, completing the FAFSA may be your child’s introduction to filling out important legal forms—a useful skill for young adults who are about to be responsible for managing their own affairs.
Sachetta, LLC’s team of financial advisors are here to help parents make the best financial decisions for their families, whether they’re just starting education planning for a new baby or looking at financial aid options for a graduating senior. If you have questions about affording college or the FAFSA, contact us today.
Stephen Sachetta CPA, MST is a Certified Public Accountant and holds a Master’s Degree in Taxation. He has a diverse background of experience in the public accounting field over the past 40 years, ranging from the former Big 8 to being one of the founding partners of our firm. He specializes in the Restaurant and Food Service Industry and works with individuals and small businesses at developing them into flourishing companies while helping them to save tax dollars along the way.