On June 5, 2025, the U.S. Department of Education released its annual update to the Federal Need Analysis Methodology for the 2026–27 award year. This methodology determines students’ eligibility for federal financial aid programs, including Pell Grants, Federal Work-Study, Supplemental Educational Opportunity Grants (FSEOG), Direct Loans, and TEACH Grants.
The Department updated five core tables used to calculate a student’s Student Aid Index (SAI), reflecting inflation adjustments based on the Consumer Price Index for All Urban Consumers (CPI-U) from April 2020 to April 2025:
- Income Protection Allowance (IPA): Increased to shield more of a family’s income from being considered available for educational expenses.
public-inspection.federalregister.gov - Adjusted Net Worth of a Business or Farm: Revised to more accurately assess the value of family-owned businesses or farms in financial aid calculations.
- Asset Protection Allowance: Updated to protect a portion of family assets from being counted in the SAI, though recent trends show a decline in these allowances.
- Assessment Schedules and Rates: Modified to determine the percentage of available income and assets expected to contribute to educational costs.
public-inspection.federalregister.gov - Employment Expense Allowance: Adjusted to account for necessary employment-related expenses, reducing the income considered available for education.
These updates are mandated by Section 478 of the Higher Education Act of 1965, ensuring that financial aid assessments remain aligned with current economic conditions. The updates to the tables are relatively modest, mainly reflecting routine adjustments for inflation.
For detailed information, refer to the official notice in the Federal Register: Federal Need Analysis Methodology for the 2026–27 Award Year.