03 Nov Understanding the New Changes to Federal Student Aid and the Student Aid Index

The FAFSA —the Free Application for Federal Student Aid—typically opens on October 1st. This year, however, the launch is delayed until December following a major revamp of the U.S. Federal Student Financial Aid system. Introducing the Student Aid Index (SAI) is among the most notable changes.

What is the Student Aid Index (SAI)?
The Student Aid Index (SAI) has replaced the Expected Family Contribution (EFC) as part of the financial aid process. While the EFC measured how much a student’s family was expected to contribute to their education costs each year, the SAI is a bit different.

The SAI is an index number that colleges and universities use to determine how much financial aid students are eligible for. This new number helps calculate each student’s specific package of financial assistance. It is calculated using a formula that considers a family’s income, assets, benefits, and the student’s income and assets.

Unlike the EFC, the SAI allows for a negative number, which enables more precise measurements of a family’s financial strength or lack thereof. This can allow for greater financial aid eligibility for those in the greatest need.

Key Changes to the Federal Student Aid Process
The switch from the EFC to the SAI is just one of several key changes in federal student aid. Other notable adjustments include:

• Simplified Free Application for Federal Student Aid (FAFSA): The FAFSA form has been significantly simplified and now requires fewer fields to be filled in. This makes it easier for families to complete and is expected to increase the number of applicants. The reduced complexity partially results from eliminating questions on selective service and drug convictions.
• Pell Grant Eligibility: The rules surrounding Pell Grant eligibility have been expanded. The lifetime eligibility for Pell Grants has been increased from 12 to 14 semesters. This change will make more funds available to students who need extra time to complete their degrees. Additionally, the maximum Pell Grant award has been increased.
• Bankruptcy and Student Loans: The rules have been changed to make discharging student loans in bankruptcy easier. Previously, student loans were notoriously difficult to have discharged. This change is expected to help those in severe financial distress find a way out from under their student loan debt.
• Subsidized Loans: The policy that limited subsidized loan eligibility to 150% of a program’s length has been eliminated, allowing students to borrow more subsidized loans over a longer period, providing lower costs to those students.

The Impacts of These Changes
These changes are expected to make applying for federal student aid more straightforward and the actual aid provided more equitable. The move to the SAI from the EFC is likely to result in more accurate aid distributions and could lead to more students being able to afford higher education.

The changes are expected to increase access to federal student aid by simplifying the FAFSA and expanding Pell Grant eligibility, especially for low-income students. The changes surrounding student loans and bankruptcy could help those in financial distress, while the changes to subsidized loan eligibility can help students save money in the long run.

Multiple Students in College

One controversial aspect of the SAI is that it doesn’t consider whether a family simultaneously has multiple children in college. Under the previous EFC model, there was consideration for families with multiple children attending college simultaneously. The EFC was divided by the number of children in college. For example, if a family had an EFC of $30,000 and three children in college, each child’s financial aid calculation would treat the family’s contribution capacity as $10,000.

The introduction of the Student Aid Index (SAI) changes this. Unlike the EFC, the SAI is not divided among the college-going children in a family. In the same scenario, each child’s SAI would be $30,000, not $10,000. This change can significantly impact how much aid a family might receive if they have more than one child attending college.

This shift may make it seem like families with multiple college students have a higher ability to pay for each student than they realistically do. It could lead to reduced financial aid for some families compared to what they would have received under the EFC model, raising concerns among families and financial aid experts. However, it’s also worth noting that colleges and universities can adjust financial aid offers to account for these situations so that it may mean something other than an automatic reduction in assistance for families with multiple college students.

Importantly, unlike the Student Aid Index (SAI), colleges that use the CSS Profile are likely to continue to account for multiple students from the same family attending college at the same time.

What Are CSS Profile Colleges?

The CSS Profile, or College Scholarship Service Profile, is an online application created and maintained by the College Board that allows college students to apply for non-federal financial aid. Nearly 400 colleges and universities (mostly private) use it for awarding grants and scholarships.

The CSS Profile is more comprehensive and detailed than the Free Application for Federal Student Aid (FAFSA). While the FAFSA is used to apply for federal aid, such as Pell Grants, federal student loans, and work-study programs, the CSS Profile is used by institutions to award their institutional funds.

Here’s a quick overview of what the CSS Profile includes:

• Student’s and Parents’ Income: This consists of all sources of income, both taxable and non-taxable. It also considers income from the last two years and projects for the following year.
• Assets: The CSS Profile takes a broader view of family assets than the FAFSA. It considers home equity, non-retirement assets, and business assets.
• Expenses: The CSS Profile also takes into account a variety of costs, such as elementary and secondary school tuition for siblings, medical expenses, and family living expenses.
• Minimum Student Contribution (MSC): The CSS Profile uses this to determine the minimum amount the student should contribute to their education costs.

One significant difference between the FAFSA and the CSS Profile is that the CSS Profile considers the family’s overall financial picture, including factors such as whether the family lives in a high-cost-of-living area. It also allows for more detailed explanations of special circumstances, like medical expenses or job loss.

Students applying to a college or university that uses the CSS Profile for financial aid decisions must complete both the FAFSA and the CSS Profile.