Here’s What You Need to Know About the FAFSA Simplification Act

During the 2020-2021 FAFSA application cycle, 17.8 million FAFSAs were submitted. If you’re planning on applying for the first time, you may have heard about the FAFSA Simplification Act. Starting during the 2024-2025 award year, the FAFSA Simplification Act will change the way federal aid is provided to students.

This might make parents, guardians, and college attendees wonder where they stand with federal aid and how the requirements will change. This helpful article explains what you need to know so you can enter the 2024-2025 school year confident and prepared.

Changes to the Higher Education Act

If your state relies on the FAFSA to award federal aid, then it’s affected by this new law. This law amends the Higher Education Act of 1965.

But what is the Higher Education Act?

The Higher Education Act (HEA) was created to assist post-secondary students with attending college by offering financial aid. Post-secondary schools would essentially receive more money, making it easier for students to attend. The HEA was designed to provide scholarships and low-interest loans to qualifying students.

The FAFSA Simplification Act amends the HEA. There are key elements of this law that you need to be aware of.

For starters, the EFC (Expected Family Contribution) will be replaced with the SAI (Student Aid Index). This means that the current metrics used to determine a student’s eligibility will soon be replaced. The new way of calculating eligibility removes how many family members a family currently has enrolled in college. It also allows families to have a minimum SAI score of -1500 (previously zero). Additionally, there will be separate eligibility to determine if you qualify for a Federal Pell Grant.

Other changes include an elimination of alternate EFCs. This would be for an enrollment period that isn’t nine months. The SNT (Simplified Needs Test) would be eliminated, along with Auto-Zero calculations. However, they have been replaced with other similar calculations.

FAFSA Formulas and Forms

Some additional changes include the way the FAFSA determines a student’s family size. This means that the FAFSA will more closely follow what a student or their parent/guardian reposts on their tax returns.

Currently, FAFSA always includes the student, even if they’re not living with their parents. The student’s parents are counted in household size as long as the student is still considered a dependent. In the instance of separated or divorced parents, the custodial parent is the only one counted. Siblings are included and don’t have to a) live at home or b) attend school.

This new law will also work to streamline the FAFSA form. This means that, if possible, Federal Pell Grants and the SAI will be calculated using information obtained directly from the IRS. The Fostering Undergraduate Talent by Unlocking Resources for Education Act (FUTURE Act) makes this exchange of information possible and will work in tandem with the FAFSA Simplification Act. These both take effect starting during the 2024-2025 award year.

Unlike previous years, students won’t have to answer questions about whether they’re registered for Selective Service or if they have any drug convictions. There will be questions added regarding a student’s race, sex, and ethnicity. However, these questions won’t affect is a student qualifies for federal student aid.

Federal Pell Grants

Federal Pell Grants are only available to undergraduate students. These students can’t have earned any other undergraduate degree. Additionally, these students must be considered low-income.

Federal Pell Grants may be awarded to students who are currently enrolled in teacher certification programs, even if it’s postbaccalaureat. The Federal Pell Grant isn’t a loan so you don’t have to pay it back. It’s currently not awarded at more than $6,895 per school year.

However, the FAFSA Simplification Act works to expand what students qualify for a Federal Pell Grant. Additionally, family size will play a role in eligibility, coupled with the federal poverty level. This will all begin during the 2024-2025 award year.

Students currently incarcerated in federal and state prisons will once again qualify for Federal Pell Grants. This takes effect during the 2023-2024 award year.


There have been some changes to allowances against income. Starting the 2024-2025 award year, FWS (Federal Work Study) Program income will qualify for allowances against income.

Allowances against income also apply to institutional grants and scholarships that are part of AGI (adjusted gross income) as reported on your federal tax return. Allowances against income also apply to the American Opportunity or Lifetime Learning education tax credit amounts. This would need to be claimed on your federal tax return.

Additionally, allowances against income apply to the payroll tax allowance and federal income tax paid.

The new SAI formula no longer treats child support paid, cooperative education employment earnings, combat pay, and state/other tax allowances as allowances against income.


The SAI formula — more specifically, the asset contribution components — will change significantly with the new FAFSA Simplification Act.

For example, the amount of child support you receive must be included in assets. If you’re the person receiving child support, you have to report the total amount you received as of the last complete calendar year.

A business’s net worth is no longer restricted to companies that employ more than 100 employees (full-time).

When calculating a farm’s net worth, the farm’s value is now taken into consideration. The only thing excluded is the value of the home where the family permanently resides.

Other changes apply to dependent students. Education savings will be considered a parental asset only on accounts designated specifically for that student.

Additionally, financial aid administrators can now use their professional judgment to determine if a family farm or business’s proceeds or losses will be excluded from family assets or income. Assets will also be adjusted if a student requires additional funds due to the disability of the student, their spouse or dependent, or their parent/guardian.

Prepare for the FAFSA Simplification Act

While the FAFSA Simplification Act changes certain FAFSA qualifiers, it doesn’t change the fact that financial aid is still available to eligible students. Although there will be significant changes to the FAFSA, College Funding Professionals is here to assist you with every step of your college application process.

Join our free online Facebook Group to gain access to the best college planning advice anywhere.

Related Posts: