The Department of Education, via a Dear Colleague Letter (DCL) published on August 4, summarized changes coming to the Free Application for Federal Student Aid (FAFSA) process, multiple systems, and various Title IV policies and procedures for the 2024-25 award year.
ED notes that it will “make significant and extensive changes to the FAFSA form and process for the 2024-25 Award Year.”
ED’s guidance also summarizes changes that have already taken effect over previous award years, as ED has implemented the FAFSA Simplification Act, which was passed in 2021 and amended in 2022. Of particular note to business officers, the legislation addresses student eligibility, need analysis formulas, cost of attendance, and more.
Business officers should have at least a basic understanding of ED’s changes to how federal student aid is awarded to students, including the need analysis formulas and the calculation of Pell Grant awards.
Because the changes have introduced new terminology to the aid process, ED also shared an accompanying announcement that lists and defines many of the key terms and systems created or changed under the pieces of legislation.
Student Aid Index
One of the key changes is the transition from the Expected Family Contribution (EFC) to the Student Aid Index (SAI). Like the EFC, the SAI will determine each student’s eligibility for certain types of federal aid. The formulas used to calculate the SAI will use information provided on the FASFA form and tax information obtained from the IRS.
The DCL highlights four significant changes to the need analysis formula used to calculate the SAI:
- Removal of the number of family members in college from the eligibility calculation
- The possibility for an SAI to be a negative number, with a minimum SAI of -1,500, instead of zero
- Elimination of alternate EFCs for enrollment for a period other than nine months
- Elimination of the Simplified Needs Test (SNT) and Auto-Zero calculations. Some applicants will still qualify for an automatic Maximum Pell Grant or be exempt from asset reporting based on similar criteria.
The DCL provides detailed information on the income components, asset components, and allowances against income used in calculating the SAI.
Awarding Aid Using the SAI
The term “estimated financial assistance (EFA)” will be replaced with “other financial assistance (OFA).” OFA still refers to all scholarships, grants, loans, or other assistance known to the institution at the time the determination of the student's need is made.
While the names of the components have changed, the basic formula for determining a student’s need remains the same. When determining a student’s need, an institution will use the following formula: Cost of Attendance (COA) minus Student Aid Index (SAI) minus Other Financial Assistance (OFA) equals need: [COA] – [SAI] – [OFA] = [Need].
Changes Previously Implemented
ED notes several components of FAFSA simplification that have already been implemented over the last several award years, including—
- 2021-22: Elimination of limitations on student eligibility related to Selective Service registration and drug convictions; elimination of the subsidized usage limitations on eligibility for Direct Loans
- 2022-23: Changes to the definition of cost of attendance (COA), professional judgment (PJ) requirements, application process for unaccompanied homeless youth and foster care youth, and Pell Grant lifetime eligibility restoration
- 2023-24: Elimination of the ban on Pell Grant eligibility for confined or incarcerated individuals
The DCL includes links to guidance summarizing the changes for each of the above award year changes.
ED Resources and Contact Information
ED has created a FAFSA Simplification Information page on FSA’s Knowledge Center (formerly known as IFAP). ED has indicated it will provide additional operational guidance and technical resources soon.
ED also published Questions and Answers about FAFSA Simplification changes for the 2024-25 award year.
Additional questions can be sent to ED using the Contact Customer Support form in FSA’s Partner Connect Help Center. When submitting a question related to ED’s DCL, select the topic “FSA Ask-A-FED/Policy.”