What the Upcoming FAFSA Changes Mean for Students

Not too long ago I was a high school senior applying to college for the first time. I remember the buzzing excitement and anxiety surrounding the college application process. The prospect of being the first in my family to leave home and attend a four-year institution was thrilling, but at the same time, it meant completing the Free Application for Federal Student Aid (FAFSA)—a feat in and of itself.

As I gathered my parents’ documents and attempted to fill out the FAFSA by myself, I was scared that a simple error would jeopardize my chances of securing financial aid. Unfortunately, this is not an uncommon situation for first-generation and low-income students to find themselves in. According to a survey by EAB, an education consultancy firm, approximately 40 percent of first-generation and low-income students said they completed the FAFSA without help from anyone else. Since FAFSA determines how much financial aid you get, small mistakes can have big consequences.

The FAFSA is the federal form that students must complete to be considered for any financial aid from the federal government, state, or one of the colleges they hope to attend. The form requires detailed financial information, and for many students who don’t understand how financial aid works, filling out the FAFSA can add to the pressure and stress of the college application process. This can be particularly difficult for first-generation, low-income students who lack access to information or resources to fully understand and complete the FAFSA.

Why Is FAFSA a barrier to college for some students?

The National Center for Educational Statistics (NCES) found that 23 percent of high school graduates did not have enough information about how to complete a FAFSA, 15 percent did not know they could complete a FAFSA, and 9 percent thought the FAFSA forms were too much work or too time-consuming. Students are missing out on an estimated 3.7 billion dollars in free college aid simply because they are unable to complete the application, and the new application can address that. The Department of Education recently released the first draft of the new application. It represents the biggest overhaul of the financial aid process in decades and will hopefully make it easier for students who are put off by the current complexity to apply for aid.

What is the FAFSA Simplification Act?

The current FAFSA application process requires students to answer over 100 detailed questions, interpret tax returns, and navigate financial aid jargon. However, the FAFSA Simplification Act will make the process easier and more accessible for students. Passed by Congress in December 2020, the Act helps students receive financial aid by shortening the application and expanding eligibility for federal aid.

While these changes are meant to help students and their families, the impact on eligibility for Pell Grants and institutional need-based financial aid varies. While some students will see their financial aid increase, others may see it decrease. It is crucial for low-income students, especially those who are students of color, to be aware of these changes when making decisions about higher education.

This new version addresses existing barriers with length and complexity by reducing the number of questions from 108 to approximately 46. Moreover, students won't need to answer all questions manually because the FAFSA Simplification Act will be implemented alongside the Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE) Act which improves the existing IRS Data Retrieval Tool (DRT).

The DRT enables students to import tax and income data directly from the IRS and the FUTURE Act allows more students, including non-filers, to use it to share data directly with the Federal Student Aid (FSA) program. This reduces the hurdles that students face in determining their financial aid eligibility using the new Student Aid Index (SAI) which replaces the Expected Family Contribution (EFC) in determining how much financial aid students qualify for. The updated form will be available in December 2023, a delay in the typical application cycle which usually begins in October, but in time for the 2024-25 school year nevertheless.

Who will it benefit?

In the 2020-21 school year, roughly 1.7 million high school seniors did not complete the FAFSA even though approximately half would have been eligible for Pell Grants aimed at low-income students. According to the National Postsecondary Student Aid Survey (NPSAS), approximately 40 percent of students who didn’t complete a FAFSA believed they were ineligible for any financial aid. This is in spite of the fact that all colleges use FAFSA information to determine eligibility for federal aid, and most use it for state aid and institution scholarships and grants as well.

This is consequential for low-income, students of color who are already less likely to file an application, missing out on free college aid. Among households with annual income less than $80,000, 17.5 percent of admitted Black students and 14.9 percent of admitted Latinx students did not file an application, a rate that is much higher than their white or Asian American peers. With the cost of tuition on the rise, these students are less likely to enroll, and those who do enroll may struggle to pay for college.

Ensuring that everyone is aware of and understands the new FAFSA is a crucial first step toward addressing concerns about college affordability and advancing educational equity, especially for populations who can benefit the most from financial aid. The simplified application not only encourages more students to complete the form, but new FAFSA calculations will make thousands of new students eligible for aid. A report from Brookings estimates that Pell Grant eligibility will rise by $2.6 billion. More students should take advantage of the new application, regardless of whether they believe they are eligible or not since many students will be newly eligible for Pell grants.

Why does it matter?

As a tuition and student debt crisis looms, financial aid has become increasingly crucial for students seeking to access higher education. However, many eligible students are not applying for financial aid, which can have long-lasting impacts on their economic security. In a recent report by Gallup and the Lumina Foundation, cost of attendance remains the biggest barrier to college enrollment, and financial aid can significantly impact students’ decisions to pursue higher education.

Simplifying the financial aid process will improve student awareness of the financial resources available to them and what they have to pay. Studies have shown that students who complete the FAFSA are more likely to enroll in college, and a simpler financial aid process directly benefits students because they are more likely to file, receive aid, and ultimately complete their degrees. College enrollment has been dropping precipitously for the past few years and making it easier to apply for aid is one way to help turn those numbers around.

Where do we go from here?

Simplifying the financial aid process is a critical step toward addressing issues of educational equity and ensuring that all students have access to the information and resources they need to succeed in higher education. However, it is not enough to only simplify the process; it is equally important to communicate these changes to students and families to ensure that as many students as possible can benefit from the more streamlined application process.

As the FAFSA application opens later this year, it becomes increasingly important to ensure that students can complete their applications in a timely manner. The Department of Education must actively promote the new application, and high schools and colleges have a critical role in disseminating this information to their students and ensuring that they understand how upcoming changes may impact them. Accessing financial aid can make all the difference for students who are already navigating a stressful college application process, and knowing that the financial aid application process has gotten a lot simpler can provide a lifeline that alleviates the burden of their financial struggles.

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