Last month, while we were all trying to enjoy the Holiday season, Congress passed and the president signed major, significant legislation that will change how financial aid is calculated.

The FAFSA Simplification Act is the culmination of years of effort by Senator Lamar Alexander (R-TN), who retired from the Senate this week after serving 3 terms. Alexander also served as Secretary of Education under George H.W. Bush. As senator, Alexander repeatedly advocated simplifying the FAFSA, which will be reduced from 108 questions to 36. This reduction is good news, and there are other favorable actions included in the Act. 

But there will also be some changes that could have terrible impact on middle class families.

Without rehashing the entire Act, I’ve highlighted below some of the significant changes and how they will impact many of the families we serve.

For starters, the changes will go into effect for the 2023-24 year, which means the current class of 10th graders will be the first to face the new rules. Of course, these new rules will also impact those students already enrolled in college at that time, which means today’s 11th and 12th graders will see a rule switch midway through their college years. How’s that for fair? Still, there is precedent for such a change, and good luck arguing with a financial aid administrator about the new rules. Instead, it’s to your benefit to learn them.

Below are some highlights:

  • The term “Expected Family Contribution” or “EFC” is being replaced by “Student Aid Index”. This is a nominal change to address the fact that EFC was confusing to parents who thought they were only required to pay the EFC. I’m not so sure SAI will make things any less confusing.
  • A 529 savings plan or prepaid plan will be considered a parent asset even if the account was opened and maintained by someone other than the parent, i.e. grandparent or other relative. This will negatively impact students whose grandparents opened a college savings plan.
  • For divorced families, the parent who provides the most support will be required to complete a FAFSA. Currently, the parent where the student lives the majority of the time can complete a FAFSA. This closes a major loophole for divorced families and could make college more expensive.
  • Child support will be considered an asset as opposed to untaxed income. While this is a positive change because assets count less towards the formula than untaxed income, it could be irrelevant if the person receiving child support is not completing the FAFSA (see above).
  • Colleges will face more specific disclosure requirements on the cost of attendance, including a separation of room and board expenses. This will benefit all families.
  • Financial aid administrators may not universally deny all professional judgment requests. This opens the door to families with special circumstances who wish to appeal their financial aid awards. 
  • The FAFSA will no longer divide the amount parents shall pay by the number of students in college. This is an enormous change that could severely impact middle income families who have more than one student enrolled in college. For example, in the current world if your EFC is $20,000 for one child, when child #2 enrolls the EFC should drop to $10,000. This reduction will no longer apply in the new Act. How colleges treat multiple children in college is something to carefully watch. This rule change will have limited impact on low-income families who already qualify for maximum aid.

There is much more in the 167 page Act. And while these changes are significant – perhaps the most significant in the 14 years since I’ve been assisting families – they do not address the CSS Profile and the College Board’s Institutional Methodology. The CSS Profile is still required by hundreds of colleges, including many of the most selective colleges in the country, to qualify for institutional grants. How and whether the College Board tweaks its methodology to align with FAFSA remains to be seen. 

Also, the incoming Biden Administration supports free public university tuition for families earning less than $125,000. If such an idea becomes law it could dampen the effects of the FAFSA Simplification Act on families in this income bracket. 

As I’ve been saying for years, don’t depend on the government to make college more affordable. The best strategy involves early planning, knowing the financial aid rules and how they impact your family’s situation, assembling the right list of colleges to apply to, and then executing on that strategy – both you and your student.

If you want to know how to create a college plan for your family, don’t delay in reaching out to us. The time to act is NOW, well before your child enters 12th grade. The best results come from early planning. Don’t be another one of those parents who says to me, “I wish I got started with you when my kid was younger!” 

So here’s another item to add to your New Years Resolution list – one that doesn’t require the same effort as diet or exercise. If you’re interested in learning more and to schedule an appointment, give us a call at 954-659-1234, or email me, peter@yourcollegeconcierge.com

I’m looking forward to hearing from you – let’s tackle this problem together.

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