A new free application for federal student aid is less than a year away, and colleges and universities are already planning the long-awaited overhaul of federal student aid.
To help with this effort, the National Association of Student Financial Aid Administrators has created a modeling tool and plans to release a white paper this week with seven case studies that show how the changes affect student aid eligibility. help for students. In most cases, student aid eligibility should not change much, but the case studies show some of the cases in which eligibility would change.
“Every student isn’t going to be in the financial aid office saying, ‘What happened to my Pell scholarship? Not all schools will face huge budget shortfalls,” said Jill Desjean, senior policy analyst for NASFAA, who designed the case studies in the white paper. “For many students, they will get the same amount of Pell Grant as usual. Their eligibility for other aid will be much the same as before.
The U.S. Department of Education will release a new version of the free federal student aid application next October that is expected to be shorter and simpler and take effect for the 2024-2025 academic year. The new application, which is the first step for millions of students to receive federal financial aid as well as need-based state and institutional aid, is one of many changes called for in the FAFSA simplification law. The law expanded eligibility for Pell Grants, simplified the application and its underlying requirements, and repealed subsidized loan eligibility limits for direct undergraduate loans. In addition, the Expected Family Contribution, which measures how much students can afford to contribute towards their college education, will be replaced by the Student Aid Index.
“The impact of these changes is really huge for schools, certainly for institutional budget planning,” Desjean said. “If they’re going to have more students with more needs, they’re going to have to have higher institutional budgets to meet that need.”
NASFAA and other groups are still awaiting more concrete guidance from the department on how to implement the various changes.
“We’re certainly looking forward to the Ministry of Education’s Student Aid Index formula guide,” Desjean said. “It was supposed to come out this summer, and we’re still waiting for it.”
This formula guide will show how eligibility is calculated. NASFAA’s modeling tool is based on its interpretation of the FAFSA Simplification Act.
“The FAFSA is the key to unlocking billions of dollars in financial aid for millions of students every year, and these changes will not only make the form easier to complete, but also allow more students to qualify for Pell Grants,” said Justin, NASFAA President and CEO. Draeger said in a press release. “However, in the world of political trade-offs where we balance fairness and simplicity, some students may also qualify for less federal student aid. It is important that financial aid administrators understand how these formula changes will impact their students so they can plan for them today.
One group that will likely see significant changes in student aid eligibility are families with more than one child in college. In the NASFAA example, a student whose parents have three children enrolled in college has an expected family contribution of $5,600 under the current model and would receive $695 in Pell Grant assistance. But when the federal student aid payment formula changes, that student’s student aid index, which measures how much they would have to pay, would triple, to $18,400.
“Families with more than one child in college right now are going to see this change as very unfair, but I think there’s a good argument to be made the other way around – that the current treatment where if you have more than one child in school at the same time is not fair because if you have two children who are four years apart you pay twice as much but if you have twins you take advantage of this discount.
The current formula is determined by a family’s income, but she said the new formula will better reflect how individuals pay for college.
“The truth now is that with the cost of college, families are paying for college for many, many years, they’re dipping into their savings,” she said. “They’re tapping into their current income and they’re tapping into their future income by borrowing.”
In another scenario, a student who earns $196,000 and has $6,000 in savings would qualify for the maximum Pell Grant under the new formula because his single parent has a total income of $27,000. Under the current model, the student would have to pay $61,000. The new model will determine Pell Grant eligibility by first looking at family income, household size and federal poverty guidelines. Pell Grant eligibility is currently tied to what families are expected to contribute, as determined by the formula.
“While a dramatic departure from the current eligibility of Pell and [federal methodology] formulas, this is also a highly unusual case and financial aid administrators should rarely expect to see situations like this,” the report states.
The new formula will also take into account the value of a family’s small business or farm, which are currently exempt. The exact impact of including small businesses and family farms on the Student Aid Index depends on a family’s adjusted gross income as well as the value of the business or farm. For example, a family of five with an income of $61,000 and a business valued at $200,000 would have an expected family contribution of $1,975 in the current model, but a Student Aid Index of $2,870 in the new model.
The NASFAA case studies build on previous studies that detailed how simplifying the FAFSA would change student aid eligibility.
“If you have an actual scenario in front of you, I feel like it clicks a lot faster than when you try to imagine this hypothetical formula,” Desjean said.
Desjean said financial aid administrators can use the case studies as a guide for using NASFAA’s modeling tool and analyzing their own institutional data.
As institutions prepare for the financial aid overhaul, Desjean said administrators will have to make decisions about how to help students and families who see sudden changes in eligibility and budget for related impacts.
“That’s why we’ve really developed the model and these case studies, so that it can help schools plan so that they aren’t surprised in 24-25 by all these huge changes that are coming,” said- she declared.