The first step prospective and current college students can take toward receiving financial aid is filling out the Free Application for Federal Student Aid, known as the FAFSA. But due to the bipartisan FAFSA Simplification Act passed in 2020, families are seeing major changes on the 2024-2025 form.
One major change is replacement of the expected family contribution — a formula to determine need-based financial aid eligibility based on answers families provide on the FAFSA — with the student aid index. Here’s what to know about the new calculation and how it relates to paying for college.
What Is the Student Aid Index?
The EFC caused confusion for years, experts say, because many families believed the calculation was the amount they were required to pay for college. However, that wasn’t true. Colleges determine financial need by subtracting the student’s EFC, now the SAI, from the total cost of attendance.
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“Changing it to the student aid index is a more appropriate use of terminology because … it helps the student to understand that the college is going to use that number to determine their eligibility for financial aid,” says Kenneth Ferreira, vice president for institutional planning and effectiveness, and director of student financial services at Franklin Pierce University in New Hampshire.
How Is the Student Aid Index Calculated?
The analysis formula is based on a family’s taxed and untaxed income, including adjusted gross income; deductible payments to individual retirement accounts like SEP, SIMPLE, Keogh, or other qualifying plans; tax-exempt interest; untaxed portions of IRA distributions and pensions; and foreign income exclusion. Assets and benefits received, like Social Security or unemployment, are also considered.
According to the U.S. Department of Education, the SAI formula for a dependent student combines parents’ and the student’s contributions from income and assets. For independent students, only the student’s contributions from income and assets are totaled.
Student Aid Index vs. Expected Family Contribution
There are a few differences between SAI and EFC, such as elimination of the number of family members in college from the calculation.
Previously, if a parent indicated on the FAFSA that they had multiple children in college at the same time, their EFC would be divided among those enrolled. However, that’s no longer the case. Because of that, “families could experience an increase in their (calculation), which means that they are going to get less aid than they had last year,” says Raymond Nault, president and CEO of College Aid Services, a higher education consulting firm.
He says this concerns many financial aid administrators because it will increase the amount of professional judgments — the process of appealing an aid package –they receive. “Will it mean that students may not return … ? We are all waiting to see what this next iteration is going to look like.”
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Assets that weren’t previously considered in the EFC, like farms and small businesses, are also now considered in the SAI calculation.
Additionally, unlike the EFC — where the lowest number was 0 — families can receive a negative SAI, which indicates higher need. The SAI goes as low as negative 1,500. Students with an SAI between negative 1,500 and 0 are likely to qualify for the maximum Pell Grant.
“So what that’s doing, it’s taking into account families who, for instance, may have experienced a job loss, had a disruption in pay or a situation where there’s a divorce,” Ferreira says. “Where all of that in the past could be documented and gone through an appeal process. But the hope is that the FAFSA itself is catching some of that now that it is looking at SAI versus EFC.”
Questions About the Calculations?
Anyone with questions about the SAI can contact the Federal Student Aid Information Center, known as the FSAIC. The Federal Student Aid Estimator is also available online, which gives an estimate of how much federal aid students may be eligible for based on their SAI.
[Read: FAFSA Deadlines You Should Know.]
A college’s financial aid office can be another resource and help families understand the differences between SAI and EFC, Ferreira says.
Due to the delays and complications related to the 2024-2025 FAFSA, colleges are being flexible with their priority filing deadlines. After the Education Department announced Jan. 30 that the first batches of FAFSA data wouldn’t start being sent to schools until the first half of March, schools like Monmouth College in Illinois decided to push back the typical May 1 enrollment deadline — when students have to put down a deposit to confirm their spot — until at least June 1.
Even though there are delays, “that doesn’t mean (students) shouldn’t attend college this year,” says Kay Lewis, assistant vice provost for enrollment and executive director of financial aid and scholarships at the University of Washington.
“Things are going to get worked out and there will be time for them to get their offers to decide which school to go to and then to have their funds available to pay when they go to enroll. So we are just hoping that students don’t get discouraged from applying or from attending college. It really is, I think, a temporary problem that we are trying to help students work through.”
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FAFSA Changes: What Is the Student Aid Index? originally appeared on usnews.com
