June 22, 2024

Planned FAFSA Adjustment To Unlock $1.8 Billion In College Financial Aid – Forbes Advisor

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The Department of Education will adjust its aid calculations based on the Free Application for Federal Aid, or FAFSA, to account for the sharp rise in inflation. That move will free up an estimated $1.8 billion in financial aid for college students and their families.

The 2024-25 FAFSA currently relies on tables that are three years old to assess how much family income should be shielded from consideration when determining a student’s financial aid. Meanwhile, consumer prices have risen 19% since January 2020.

The new inflation adjustment will shield more of a family’s income from being considered as available for college expenses. A failure to address this problem would have limited the amount of aid some students could receive.

While the Education Department confirmed in a statement that it plans to make the modification for the 2024-2025 award year, it has not said exactly when that will happen. And that lack of timetable has renewed concerns that financial aid offers could go out late.

The planned update comes amid a complete redesign of the FAFSA for 2024-2025, which the department says includes new methods for determining aid, improved access to Pell Grants and a simplified online form.

But the release of the new FAFSA had a rough start. The online form did not become available until December 30, months after the October 1 target date. Then the FAFSA was inaccessible—or applicants were unable to complete the form—for long periods of time during its first few days. Officials say it’s now available online 24/7.

The FAFSA determines a student’s eligibility for federal grants, including Pell Grants, work-study programs and student loans that can make it possible to afford college. Many state-level higher education agencies and schools also use the FAFSA to distribute financial aid.

How Does This Update Affect Student Aid?

The fix is meant to prevent a miscalculation of what a family can afford to contribute to college expenses.

The FAFSA Simplification Act of 2020 called for the Education Department to revamp the Income Protection Allowance (IPA), a metric that represents the portion of a family’s income that is shielded from being considered for college expenses.

Universities, lawmakers and other groups, including the National Association of Student Financial Aid Administrators, or NASFAA, alerted the Education Department late last year that the inflation adjustment had still not been addressed.

The IPA will now reflect inflation levels and other economic factors that may affect a family’s ability to pay. With the adjustment, an applicant’s income will be reduced to account for inflation, which lowers their Student Aid Index (SAI) and may qualify them for more funding.

When Will This Fix Be In Place?

The Department of Education says it will provide a timeline for the update soon, but financial aid professionals fear it won’t be soon enough.

“Adjusting these inflationary numbers is the right thing to do, and should have been done from the beginning,” said NASFAA president Justin Draeger in a statement.

“Unfortunately, because the department is making these updates so late in the financial aid processing cycle, students will now pay the price in the form of additional delays in financial aid offers and compressed decision-making timelines,” Draeger added.

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