The Department of Education is implementing changes to the Free Application for Federal
Student Aid (FAFSA) and the formula used to determine financial aid eligibility for the 2024-25
academic year.
While overall student funding will increase, an analysis by the Brookings Institution suggests
that students with siblings in college may experience a reduction in financial aid. The changes
eliminate the sibling discount, which previously reduced the expected family contribution
proportionally based on the number of siblings attending college.
As a result, families with multiple members in college will face an increased financial burden and
may be ineligible for certain financial aid programs. According to Brookings, around 900,000
students with one sibling in college could lose an average of $3,000 each in institutional grant
aid, totaling $2.5 billion. Another 157,000 students may lose all eligibility, which could have
provided up to $7,900 each in aid, totaling $1.2 billion. Additionally, families with adjusted gross
incomes of $60,000 who own farms or small businesses with fewer than 100 employees will see
their assets considered for financial aid calculations, potentially making them ineligible for
certain aid programs. However, low-income families are expected to benefit from the changes,
as the overall formula for determining eligibility has become more generous.
The changes to the FAFSA that promote eligibility for financial aid include:
1. Larger Income Protection Allowances (IPA): The IPA, which covers a family's
basic living expenses and is excluded from the financial aid formula, will
increase. This means that less income will be considered when determining
financial aid eligibility. The increase will be up to about 20% for parents, about
$2,400 (35%) for most students, and up to about $6,500 (60%) for single parents.
2. Automatic Pell Grants based on income and household size: Families with
incomes below 175% of the federal poverty level and single parents with incomes
below 225% of the poverty level will receive the maximum Pell Grant award.
Minimum grants will be guaranteed to students from households earning below
various percentages of the poverty level, depending on household structure. This
change simplifies the process and ensures quicker eligibility determination. The
State Higher Education Executive Officers estimates that approximately 2.1
million more students will become eligible for Pell Grants under the new
calculation.
3. Pell Grant awards for middle ranges of eligibility: Pell Grant awards for students
in the middle ranges of eligibility will continue to be determined using assets to
calculate the family's ability to contribute to college expenses.
4. Restoring Pell eligibility for incarcerated students and students with drug-related
convictions: Previously ineligible students, such as incarcerated individuals and
those with drug-related convictions, will regain eligibility for Pell Grants.
5. Negative contribution score: The family contribution amount can now be as low
as minus $1,500, which allows for distinguishing the neediest students. This
enables states and institutions to target need-based aid more accurately.
6. Simplified FAFSA application: The FAFSA application will be streamlined from
108 questions to 36 questions, making it easier for students and families to
complete. The application will also allow for easier importation of income data
from tax records. This simplification aims to increase completion rates, improve
college access and affordability, and make more financial aid available to
students.
While some middle- and high-income families may experience decreases in aid
eligibility as the focus shifts from cash flow to wealth, overall, more people are expected
to become eligible for financial aid. The changes aim to provide fair treatment and
increase eligibility for students seeking assistance with college expenses.
Click here to read more on the FAFSA Simplification Act.
