Beginning in the 2024-25 Award Year, Federal Student Aid will be making significant changes to the FAFSA (Free Application for Federal Student Aid) as well as the methodology used to determine student eligibility for financial assistance. These changes are anticipated to benefit students and their families, not only by simplifying the FAFSA application itself, but also by reducing barriers to accessing federal funds for education. These positive changes for financial aid applicants will have monumental impacts for higher education institutions that must start being considered now to adequately prepare for what is to come.
How FAFSA Simplification Will Impact Your Institution
One of the biggest differences that will occur when FAFSA processing for 2024-25 begins in October 2023 is that applicants will no longer receive an EFC (Estimated Family Contribution). Previously, the EFC was a calculated value from 0 to 999999 used to indicate the amount of money a student (or their family) could contribute towards their educational costs. The EFC will be replaced with a new calculated value called the SAI (Student Aid Index), which will include values from -1500 and upward. While the purpose of these two values is essentially the same, the calculations used to derive them are not. In other words, there is no direct correlation between students’ EFC and SAI values, and they may vary significantly from each other. This variance between EFC and SAI will be potentially costly for institutions in the following ways:
- Simplification of the FAFSA means data previously relied on to determine eligibility for institutional aid may no longer be available. Schools may need to develop a supplemental aid application for students to collect this information.
- Schools using awarding methodologies based on EFC or need amount based on EFC will need to review and likely revise their awarding grids to align with the new SAI calculation.
- Returning students who received aid in prior years based on EFC calculation may no longer qualify for the same amount of aid. Institutions will need to determine an awarding strategy for these students and maintaining previous levels of institutional funding for this population may incur additional tuition discount or endowed fund costs.
- Marketing materials and financial aid websites and communications that reference EFC will need to be updated to reflect the new terminology associated with SAI. Changes to awarding methodology will potentially impact the content of these materials as well. As many institutions will begin their 2024-25 recruitment cycles well in advance of the start of the academic year, the impact of FAFSA simplification must be addressed sooner rather than later.
- Systems used to manage awarding and disbursement of financial aid will need to be adjusted to accommodate any changes to awarding methodology. Any custom programming in place to process aid using EFC will at best need modification and at worst may become obsolete. Additionally, software vendors will need to provide updates for their products to accommodate these changes, and the timeliness of those releases may impact an institution’s ability to ensure their system is ready.
- Changes to the FAFSA and the data elements it provides may impact institutional reporting. Operational reports used by financial aid administrators will need to be reviewed to determine if updates are necessary to ensure process continuity. Additionally, reporting in other areas such as institutional research and admissions may also be impacted.
How to Prepare Your Institution for FAFSA Simplification
The 2024-25 FAFSA processing cycle will begin on October 1, 2023, so the sooner institutions start preparing, the better off they will be. There are several steps institutions can begin taking now to prepare for these upcoming changes.
- Discuss these upcoming changes with institutional leadership and other potentially impacted constituents. To address these changes in a timely manner, institutional leadership should be made aware of the impacts that will result from FAFSA simplification. In addition to potential financial impacts, executing the required updates may also require coordination of institutional resources. Involving leadership and impacted areas early on will help to ensure your institution manages these challenges successfully.
- Identify systems, processes, and communications that will be affected by these changes and determine a timeline for prioritizing updates. As mentioned previously, recruitment marketing materials may need revision, and will begin to be distributed much earlier than the processing of 2024-25 FAFSAs will begin. These revisions may be dependent on other items such as changes to awarding methodology, so those decisions may need to prioritized sooner.
- Monitor communications from the Department of Education regarding FAFSA simplification. The Department has previously provided information regarding the upcoming changes, but as the deadline for implementation approaches, they will begin to deliver more specific information regarding how institutions will be expected to handle these changes.
- Contact your institution’s financial aid software vendors to learn when releases related to these changes can be expected. Processing of 2024-25 FAFSAs will be dependent on your institution’s systems’ functionality. These updates may involve new processes or require changes to existing processes, so being aware of when new functionality will be available will be critical to ensuring your institution is ready.
Please don’t hesitate to contact us if you would like assistance in preparing your institution for these upcoming changes. We’re here to help!
Sources: Barnett, B., Holt, G., Jovell, K., Veeder, S. (2022, June 26–29). Impacts of FAFSA Simplification on Need Analysis and Packaging Policies [Conference presentation]. NASFAA 2022 Conference, Austin, TX, United States.
Story, M., Weisman, A. (2022, June 26–29). Federal Update [Conference presentation]. NASFAA 2022 Conference, Austin, TX, United States.