FAFSA Simplification Act: What’s Coming in 2024?
What you need to know about the impacts on your family's application process.
The FAFSA provides access to approximately $112 Billions in grant, work-study, and federal load funds each year

For families planning for college, there’s an endless to-do list of decision-making, packing, and preparing. But one can’t-miss detail is the FAFSA. The FAFSA, or the Free Application for Student Aid, is an annual application that helps families fund higher education; it provides approximately $112 billion in grant, work-study, and federal loan funds each year to more than 10 million students.1

This year, though, the FAFSA is getting an overhaul thanks to the FAFSA Simplification Act. Passed in 2020, the FAFSA Simplification Act is intended to do just as its name implies—streamline the process that students and their families use to apply. The Department of Education has spent the last three years implementing changes on a rolling basis, and the 2024-2025 academic year will see some of the most impactful changes.

The FAFSA provides access to approximately $112 Billions in grant, work-study, and federal load funds each year

Of families who didn't fill out the FAFSA 19% didn't have the required information ready and 20% found the application too complicated
Of families who didn't fill out the FAFSA 19% didn't have the required information ready and 20% found the application too complicated
Of families who didn't fill out the FAFSA 19% didn't have the required information ready and 20% found the application too complicated

 

Changes to the Form

A simplified, more user-friendly version of the FAFSA was unveiled in December 2023. Starting on October 1, 2024, the Department of Education will release the 2025-26 FAFSA form for testing with a limited set of students and institutions. The application will be made available to all students on or before December 1, 2024. (updated: 9/12/24)

The number of questions on the form has been greatly reduced from about 118 questions to around 35-45 for most students. When filling out the form, students will now only see questions that they are expected to answer, while parents and guardians will only see the questions related to them. Since the application is now “role based,” both students and parents will have to log in separately to fill out their own portions.

Federal tax information required for the application will now be pulled directly from the IRS once consent and approval are given. Applicants should note that consent and approval are a new requirement, and if not given, the student will not be eligible for federal student aid.

The FAFSA form is also changing in other ways: While the form has previously been available in both English and Spanish, the updated application will be available in at least 11 languages. And now, students will be able to list up to 20 colleges (vs. only 10). This means that even more schools will be able to receive federal student aid information (and award financial aid packages), thereby expanding the number of options for students to consider when choosing a school.

 

Of families who didn't fill out the FAFSA 19% didn't have the required information ready and 20% found the application too complicated

Changes to Aid Formulas and Pell Grant Eligibility

The “Expected Family Contribution” is now known as the “Student Aid Index.” While the Student Aid Index will calculate need similarly, it removes the number of family members in college from the calculation; allows a minimum Student Aid Index of negative $1,500;3 and implements separate eligibility determination criteria for Federal Pell Grants. Moving forward, federal aid will no longer give families a break for having multiple students in college at the same time, effectively ending the “sibling discount.” Despite this, the FAFSA will still ask about the number of family members in college because individual colleges may still make an adjustment based on that number.

The FAFSA has also raised the family income threshold to make more students eligible for need-based aid. Pell Grants are need-based, government-provided funds that don’t need to be repaid. Under the new threshold, more students will qualify for the maximum amount. The new application will also link eligibility to family size and the federal poverty level.

Several changes have been made to the asset-contribution components that especially impact families who own a business or a farm. Students and parents will be asked to report the net worth of all businesses, regardless of size, and the net worth of a farm now includes the value of a family farm, though a family’s primary residence is still excluded.

Changes have been made for divorced or separated families as well. In the past, for unmarried parents, the FAFSA duties fell to whoever the student lived with more during the previous 12 months. Now, responsibility falls to whoever provided the most financial support during that time period. If both parents provided equal support, responsibility falls to the one with the greater income or assets.

 

Financial Aid Appeal Changes

Appealing a financial aid offer isn’t bartering for a better offer because you didn’t get as much as you felt you should. Rather, it’s an opportunity for families with legitimate financial reasons (e.g., job loss, divorce, natural disasters, death of a parent, etc.) to request a second look, called “professional judgment.” With the new changes made to the FAFSA, colleges will no longer be able to issue a blanket denial for all financial-aid appeals. Appeals must now be considered on a case-by-case basis.

Special circumstances have been expanded and now include unusual business, investment, and real-estate losses, as well as the severe disability of the student, parents, or spouse. The new version also makes it easier for students who are at risk of or are experiencing homelessness to access financial aid because the reasons behind it are no longer able to be used as a factor in determination.

 

Of families who didn't fill out the FAFSA 19% didn't have the required information ready and 20% found the application too complicated

Preparing for the FAFSA

Of families who didn’t fill out the FAFSA, 19% didn’t have the required information ready and 20% found the application too complicated.2 While the FAFSA can be overwhelming, the form's recent makeover should help make the process easier for families. Before beginning the application, here are seven things that both parents and students can gather ahead of time in preparation:

  • Federal Student Aid (FSA) ID: This account username and password allows parents (or guardians) and students to identify themselves and access the Federal Student Aid websites.
  • Social Security Number: Both students and parents are required to list their Social Security number. If you aren’t a US citizen but meet other eligibility criteria for federal student aid as an eligible non-citizen, an Alien Registration number may be required.
  • Driver’s License Number: While not required, the form may ask for a driver’s license number as a way to verify identity, home state, and address.
  • Federal Income Tax Return: Though the updated form will pull your information directly from the IRS, having a copy on hand can help ensure accuracy.
  • Records of Untaxed Income: This may include records such as Supplemental Security Income, child support, or federal or public assistance.
  • Records of Assets: The form requests information regarding savings and checking account balances, as well as the value of investments, such as stocks, bonds, and real estate.
  • List of Potential Schools: Have a list ready of all schools your student may apply to, as those listed will automatically receive FAFSA results electronically. Be sure to find out if your state requires schools to be listed in a particular order to be considered for state aid.

 

College can be an expensive time for students and families, but understanding what resources are available and how to tap into them may help alleviate some frequent financial concerns.

To learn more, visit our Saving for College content library.

1 Federal Student Aid, “About Us,” 11/23. 

2 Sallie Mae, “How America Pays for College,” 2023.

3 The Student Aid Index is a number that determines eligibility for need-based aid. The updated formuals now allow this number to go as low as negative $1,500, differentiating greater levels of need for some students.

All information provided is for informational and educational purposes only and is not intended to provide investment, tax, accounting or legal advice. As with all matters of an investment, tax, or legal nature, you and your clients should consult with a qualified tax or legal professional regarding your or your client’s specific legal or tax situation, as applicable. The preceding is not intended to be a recommendation or advice.

 

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