FAFSA Simplification Act: What You Need to Know
Understanding the changes to your family's application process.

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, or the Free Application for Student Aid, which is an annual application that helps families fund higher education. It provides access to various forms of financial aid, including grants, work-study, and federal loans, helping millions of students each year.

A simplified, more user-friendly version of the FAFSA was unveiled in 2023 thanks to the FAFSA Simplification Act. Passed in 2020, the FAFSA Simplification Act intended to do just as its name implies—streamline the process that students and their families use to apply. Read on to learn more about how the Act impacted the application process.

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

The number of questions on the form was greatly reduced from about 118 questions to around 35-45 for most students. Now, when filling out the form, students only see questions that they need to answer, while parents and guardians only see the questions related to them. Since the application is “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 is now pulled directly from the IRS once consent and approval are given. Applicants should note that consent and approval are a new requirement. If not given, the student won’t be eligible for federal student aid.

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

 

Changes to Aid Formulas and Pell Grant Eligibility

The “Expected Family Contribution” is now known as the “Student Aid Index.” While aid will still be calculated similarly, it removes the number of family members in college from the calculation; allows a minimum Student Aid Index of negative $1,500;2 and implements separate eligibility criteria for Federal Pell Grants. Federal aid no longer gives families a break for having multiple students in college at the same time, effectively ending the “sibling discount.” Despite this, the FAFSA still asks about the number of family members in college because individual colleges may still make an adjustment based on that number.

The FAFSA also raised the family-income threshold, making 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 application now also links eligibility to family size and the federal poverty level.

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

Changes were 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 changes made to the FAFSA, colleges are no longer able to issue a blanket denial for all financial-aid appeals. Appeals are now considered on a case-by-case basis.

Special circumstances were expanded to include unusual business, investment, and real-estate losses, as well as the severe disability of the student, parents, or spouse. The updates also make it easier for students who are at risk of, or experiencing, homelessness to access financial aid because the reasons behind their situation can no longer be used as a factor in the 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

Among families who didn’t fill out the FAFSA, 17% didn’t have the required information ready, 17% missed the deadline, and 13% found the application too complicated.1 While the FAFSA can be overwhelming, having the necessary information ready can simplify the process. Before beginning the application, here are seven things to gather ahead of time that both parents and students may need:

  • 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.

 

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

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

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

1 Sallie Mae, “How America Pays for College,” 2024.

2 The Student Aid Index is a number that determines eligibility for need-based aid. The updated formulas 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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