In December 2020, Congress passed the Consolidated Appropriations Act, 2021, and President Trump signed it into law on December 27. In addition to pandemic relief and fiscal year (FY) 2021 funding, the legislation simplifies the Free Application for Federal Student Aid (FAFSA), reducing the number of questions on the form, in addition to various other changes. The changes will be effective starting on July 1, 2023 for the 2023-2024 academic year, giving the Department of Education time to implement the changes.
Changes to the Estimated Family Income/Student Aid Index
The Consolidated Appropriations Act changed the name of the Estimated Family Cost (EFC) to the Student Aid Index (SAI) to properly characterize the figure. The SAI can now be as low as -$1,500 (negative $1,500). This change in the SAI amount will allow for institutions to identify the very neediest students and allow students to receive aid in excess to the Cost of Attendance.
Changes to the Cost of Attendance
Institutions are required to disclose all elements of the Cost of Attendance (COA) on their website. In addition, there are several updates to the COA elements.
When it comes to the room and board portion of the COA, colleges must now separate the allowances for each element (housing and meals). The allowance for meals must be based on three meals a day. Housing allowances for students living in institutionally owned housing must be based on the average or median housing charges, whichever is greater. Colleges are also no longer able to set the housing allowance to zero for dependent students who live at home with their parents.
The COA will also be required to include loan fees on federal student loans and parent loans based on actual, not average, costs, as well as fees associated with obtaining professional licensing, credentials or certification. These are no longer optional for institutions.
Additional changes to the COA include updates to transportation and miscellaneous expenses. The allowance for transportation expenses is specified to include travel between home, school, and work, but the actual allowance will remain subject to the discretion of the Financial Aid Administrator. The allowance for miscellaneous personal expenses requires at least half-time enrollment while the allowance for rental or purchase of a personal computer no longer requires half-time enrollment.
Changes to Dependency Status
The legislation made a few changes regarding dependency status. If a dependent student’s parents are divorced or separated parents, the current policy indicates that the parent with whom the student lived with most is the responsible parent for filing the FAFSA. The new legislation transfers this responsibility to the parent who provides the greater portion of the student’s financial support. When both parents provide an equal amount of financial support to the student, the current guidance indicates the parent with the greater income is responsible for filing the FAFSA.
Changes were also made to the criteria independent students. The independent student status will now include situations in which the student is unable to contact their parents or where contact with their parents poses a risk to the student.
Additionally, a dependency override performed by a Financial Aid Administrator will be presumed to continue for the duration of the student’s enrollment at the same institution unless the student tells the financial aid office that circumstances have changed or there is conflicting information about the student’s dependency status. Dependency overrides and professional judgment adjustments will be integrated in a single authority for the Financial Aid Administrator to make adjustments to the COA on the FAFSA.
Changes to Pell Grant Eligibility
Under the new legislation, incarcerated students will be eligible for the Pell Grant. The law also establishes new criteria for Federal Pell Grant eligibility.
Maximum Pell Grant awards will go to:
- Independent student (and spouse, if applicable) tax nonfilers
- Dependent children of nonfiling parent(s)
- Independent students who are single parents and whose student AGI is below 225% of the poverty level
- Dependent children of a single parent whose parent AGI is below 225% of the poverty level
- Independent students who are not single parents whose student AGI is below 175% of the poverty level
- Dependent students with parents who are not single parents whose parent AGI is below 175% of the poverty level
- Students under age 33 whose parent died serving in the armed forces after Sept. 11, 2001
- Students under age 33 whose parent died in the line of duty as a public safety officer
Students not eligible to receive the maximum Pell award will receive a grant amount equal to the maximum award, less their SAI, rounded to the nearest $5. Students not receiving Pell awards under either of these methods could receive the minimum Pell award amount if their incomes or parent incomes falls below a set percentage of the poverty line, ranging from 275% to 400% of the poverty line.
Changes to Simplified Needs Test/Applicants Exempt from Asset Reporting
The legislation changed the name of the Simplified Needs Test to Applicants Exempt from Asset Reporting. The criteria for Applicants Exempt from Asset Reporting has also changed. If any of the following criteria apply, the applicant will be exempt from reporting assets on the FAFSA:
- The applicant qualifies for an Automatic Zero Student Aid Index.
- The applicant is a dependent student who has a calculated student aid index that is negative, if the parents’ adjusted gross income is less than $60,000 and the parents do not file schedules A, B, D, E, F or H in the second preceding tax year and either do not file Schedule C or file Schedule C with net business income that is no more than a $10,000 gain or loss.
- The applicant is an independent student who has a calculated student aid index that is negative, if the student’s and spouse’s adjusted gross income is less than $60,000 and the student and spouse do not file schedules A, B, D, E, F or H in the second preceding tax year and either do not file Schedule C or file Schedule C with net business income that is no more than a $10,000 gain or loss.
- The applicant or the applicant’s parent or spouse received a means-tested federal benefit in the previous 24-month period, including SSI, SNAP, TANF, WIC, Medicaid and federal housing assistance.
Changes to Income Protection Allowance
The income protection allowance (IPA) shelters a portion of income based on a basic living expense standard. Several changes were made to the IPA for parents and students:
- The IPA will no longer be reduced based on the number of children in college.
- For parents, the 2023-2024 IPA is set at 20% higher than the 2021-2022 IPA.
- For dependent students, the 2023-24 IPA is $9,410, a 35% increase over the 2021-2022 IPA of $6,970.
- For independent students without dependents other than a spouse, the IPA is $14,630 if single and $23,460 if married, an increase of 35%.
- For independent students with dependents other than a spouse, the IPA for married students is 35% greater and the IPA for single students is 60% greater.
Changes to Untaxed Income and Benefits
The definition of untaxed income and benefits has been updated. Untaxed income and benefits include:
- Deductions and payments to retirement plans that are delineated on the federal income tax return.
- The untaxed portion of IRA and pension distributions.
- Tax-exempt interest income
- Foreign income that is exempt from U.S. federal income tax or for which a foreign tax credit is received.
Untaxed income and benefits no longer include:
- Child support received. However, the definition of assets will include the annual amount of child support received.
- Workman’s compensation
- Veterans’ education benefits
- Housing, food and other allowances for military and clergy
- Cash support and any money paid on the student’s behalf
- Other untaxed income and benefits
Additional Changes and Updates
- Male applicants will no longer be required to register with Selective Service.
- Applicants will no longer lose eligibility for federal student aid because of a conviction for the sale or possession of controlled substances while receiving federal student aid.
- The FAFSA will no longer divide the parent assessment or contribution from an independent student by the number of family members in college (however, the FAFSA will still collect this information).
- There will be a separate set of special circumstances for Pell Grant eligibility.
- During a qualifying emergency, such as COVID-19, professional judgment may be used to set income earned from work to zero if the applicant documents the receipt of unemployment benefits within the past 90 days or provides confirmation that they have applied for unemployment benefits, unless the financial aid administrator knows that the individual has already obtained other employment.
- Emergency financial aid for a component of the COA will no longer be considered to be estimated financial assistance and will no longer be subtracted when determining the student’s financial need.
These updates and changes to the FAFSA will be effective for the 2023-2024 academic year. In addition to these updates, the Consolidated Appropriations Act, 2021 provides additional pandemic relief for higher education institutions, funding for FY 2021, and makes several related policy changes. Our post last week provides more information on those topics: Congress Releases Consolidated Appropriations Act 2021.
Sources:
NASFAA: NASFAA Deep-Dive: Changes to Federal Methodology, Other Student Aid Changes From Spending Bill
NASFAA: Q&A on Changes to Federal Student Aid Policy Included in Consolidated Appropriations Act, 2021
Forbes: Pandemic Relief Package Simplifies FAFSA