Navigating Changes to the 2024-25 FAFSA

Nov 1

The 2024-25 FAFSA recently rolled out. Here’s what families need to know.

The Free Application for Federal Student Aid (FAFSA) plays a vital role in determining a student’s eligibility for federal grants, work-study programs, and loans. The 2024-25 FAFSA introduces significant updates that families should be aware of, including the shift from the Expected Family Contribution (EFC) to the Student Aid Index (SAI). Below, we’ve broken down the changes into manageable sections to help you prepare.

1. Introduction to the Student Aid Index (SAI)

SAI provides a more nuanced calculation of a family’s financial need. Families with extremely low income may see negative SAI values, which reflect higher financial need but do not change Pell Grant maximum eligibility.

SAI Replaces EFC: Starting in 2024-25, the Student Aid Index (SAI) replaces the Expected Family Contribution (EFC). Unlike EFC, SAI can be a negative number, down to -1500.
Purpose of SAI: SAI determines eligibility for need-based aid, but it is calculated differently from EFC.
Financial Need Formula: Financial Need = Cost of Attendance (COA) - SAI - Other Financial Assistance.

2. Changes to Pell Grant Eligibility

Pell Grant eligibility now includes a three-step process that incorporates new guidelines, aiming for more equitable distribution of funds. Non-tax filers and families with low adjusted gross income (AGI) may see benefits under the new framework.

Maximum Pell Grant: Determined based on income, family size, and poverty guidelines. Families earning less than 225% of the federal poverty guideline for their household size are likely eligible for the maximum award.
New Calculation Steps:

Assess maximum Pell Grant eligibility.
Use SAI to calculate adjusted Pell Grant amounts.
Determine minimum Pell Grant eligibility for students with SAI above the maximum Pell Grant award threshold.

3. Updates to Income and Asset Calculations

Families should carefully review their financial information, as the updated FAFSA formula emphasizes transparency in income and asset reporting. Proper documentation will be critical.

Income: Adjusted Gross Income (AGI), child support received, and untaxed portions of retirement savings plans are considered.
Assets: Includes cash, savings, investments, and net worth of businesses (excluding the family’s primary residence).
Allowance Adjustments: Includes allowances for education savings and changes to how child support and tax-deferred payments are treated.

4. New Tools to Simplify the FAFSA Process

The updates include a user-friendly Parent Wizard to guide families through eligibility questions. However, families should double-check prefilled data for accuracy.

Parent Wizard: An interactive tool helps identify which parent(s) must provide information on the FAFSA.
Prepopulation: While some demographic information is prefilled, other details, such as tax information, must be retrieved through IRS integration.

5. Timeline for the FAFSA Release

Early submission is key to maximizing aid opportunities. Families should aim to complete the FAFSA as soon as it becomes publicly available.

Beta Launch: Limited release began October 1, 2024.
General Availability: Open to the public on December 1, 2024.

Key Takeaways for Families

Familiarize yourself with the new SAI formula and its impact on aid eligibility.
Prepare financial documents ahead of time to ensure accurate FAFSA submission.
Utilize online resources like the Student Aid website and Parent Tool Guide for further guidance.