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What you need to know about the FAFSA makeover

By January 2, 2024May 16th, 2024No Comments
ProsperiFi University College Planning

College planning season is in full swing. Last year over 3 million FAFSA applications were submitted for consideration. With the Free Application for Federal Student Aid (FAFSA) undergoing one of its most significant overhauls in years, new changes may reshape the cost of college for many families.

ProsperiFi University College Planning

The passage of the FAFSA Simplification Act is aimed at helping aid for low-income families. And the form will undergo much needed streamlining. Yet, alterations in how financial need is calculated may impact a student’s eligibility for aid.

Fewer questions don’t necessarily make the FAFSA application easier. But the process has definitely changed. Each question now carries more weight in determining student aid.

Usually the online application launches in October. This year, the new FAFSA won’t be available until December. This delay allows families more time to prepare for the new changes.

Here’s a breakdown of what to expect.

Unique IDs and IRS Access

One of the significant changes with the new FAFSA application is the transition to a role-based application. This means each contributor — student and parent/guardian — must have their own Financial Student Aid ID (FSA ID). All contributors must provide consent for the IRS to share tax information with the Department of Education. Failing to consent makes the application invalid, putting a quick end to the application process.

Bye! Sibling Discount

A surprising change is the elimination of the sibling discount. Under the old  formula, families with multiple members attending college simultaneously would have their Expected Family Contribution divided by the number of family members currently enrolled. Now, this discount is no longer applicable. We’ve been suggesting families in this situation to write appeal letters to financial aid offices. It’s important to consider schools that utilize the CSS profile for alternative aid opportunities.

Divorced Parents and Asset Matters

The new FAFSA closes a loophole utilized by separated parents, requiring both parents’ financial information. In cases where parents are separated but still live together, both parents must provide their details.

New asset classes are taken into consideration. Ownership in family owned and other businesses, including farms must now be reported as parent assets. This may impact eligibility for many enrolling students.

Additionally, only 529 plans benefiting the applicant need to be reported. Reporting 529 plans intended for siblings or other family members are now excluded. Also 529s from grandparents and other family members outside of the household are excluded. This helps with saving for a student without hurting their financial aid eligibility.

Pell Grant Expansion

Under the revamped FAFSA, more students will qualify for federal Pell grants, which do not require repayment. Some applicants may automatically qualify for the maximum Pell grant, while those with combined parent income below $60,000 will not need to report assets, expanding eligibility for many.