The FAFSA (Free Application for Federal Student Aid) application for the 2023-2024 school year opens on October 1st and as a result of the Consolidated Appropriations Act of 2021, changes are expected. However, most of these changes will likely be delayed until the 2024-2025 school year.
What's the delay? More than half of higher education schools haven't started preparing for the significant changes coming to the FAFSA. In addition, the CSS Profile, a form used by many higher education schools to determine institutional aid, has yet to reflect the new changes.
While we may have to wait a bit longer than expected to see the changes, some key topics remain.
The number of questions on the FAFSA is set to decrease from 108 to 36.
Expected Family Contribution (EFC) is now referred to as Student Aid Index (SAI)
The Expected Family Contribution determines how much you can expect to pay for a year of college. Now coined the "Student Aid Index," the SAI aims to help colleges better determine a student's financial needs.
Multiple Children in College
The new SAI formula no longer gives a family with multiple children in college a significant reduction in their expected contribution. Currently, the EFC is cut by almost half for each child that is in college at the same time.
Income Protection Allowance
The Income Protection Allowance is set to change, protecting a greater percentage of the students' and parents' earned income when determining how much can be put towards college.
Previously, withdrawals from grandparent-owned 529 plans counted as income to the student on the FAFSA. Cash support and gifts received were also included. This will no longer be the case, and the student's total income will only come from the data pulled from their federal tax return. Since FAFSA uses a two-year lookback, grandparents can start taking advantage of the new rules this year.
The FAFSA deadline varies for each school, but the federal due date is June 30th. A few states have adopted a first-come, first-serve policy, so completing it as soon as possible is important. Similar to the FAFSA, each school's CSS Profile deadline varies, but many of them typically fall between January 1st and March 31st.
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Prior to implementing any investment strategy referenced in this article, either directly or indirectly, please discuss with your investment advisor to determine its applicability. Any corresponding discussion with a Bedel Financial Consulting, Inc. associate pertaining to this article does not serve as personalized investment advice and should not be considered as such.
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