Major Changes to the FAFSA Coming

Financial Aid

In late December 2020, Congress passed the FAFSA Simplification Act, a 167 bill within the 5,593 page COVID-19 relief package. Making changes to the FAFSA is a huge task though. The FAFSA is an online form that feeds into a 27-page formula; its results guide 1,300 university employees in distributing federal and state aid to 13 million students attending 6,000 different schools. These changes won’t take effect until Fall of 2023 – but any student attending college in that year and beyond will want to know about the changes.

What is the FAFSA?

The FAFSA is the application used to determine eligibility for state and federal aid for college. Many colleges also use it exclusively to determine distribution of their own institutional aid. (Others use a secondary aid application called the CSS Profile, more on that below.)

Who will these changes affect?

These changes primarily will affect students/families that qualify for need-based financial aidIf you are a family that doesn’t qualify for need-based aid, the FAFSA changes should not affect you. (Although I do recommend that ALL families file FAFSA for other reasons.)

When will these changes take place?

These changes will take effect in the Fall of 2023. Current Sophomores will be the first class to apply for aid under the new FAFSA formula.

How will these changes affect the Class of 2022?

This is uncertain. Current Juniors (Class of 2022) will be entering their second year when the new formula kicks in. Most colleges require that students receiving need-based aid resubmit the FAFSA each year. What remains to be seen is whether colleges will use the new formula to adjust aid that was awarded the previous year (either up or down), or continue to award the same amount of aid students were eligible for upon entering. If you are eligible for need-based aid, this is a question you’ll want to ask each college when your student is making their final decision in senior year.

What about the CSS Profile? 

There is a secondary financial aid application called the CSS Profile, which is used by about 300 colleges to determine distribution of their own institutional aid. It is operated by the College Board, which has not yet announced whether they will adjust the CSS formula to match the new FAFSA formula.

What are the changes?

Many of the changes will only affect a tiny subset of people, so I won’t list them all. These are the changes that I feel are most important for On My Way clients to be aware of:

  • The number of questions on the FAFSA will be reduced, from 108 to 36, making it easier to fill out.
  • The term EFC (Expected Family Contribution) is changing to SAI (Student Aid Index). The term Expected Family Contribution was problematic, as it led parents to believe that their EFC was the amount they would pay for college, when often the real figure was significantly higher.
  • Colleges are now required to be more transparent when quoting their Cost of Attendance. Under the new law, COA must include tuition and fees, housing and meals, books and materials, transportation, personal expenses, loan fees, and any costs associated with obtaining professional licensure, certification, or credentials. The new law also stipulates that the itemized cost of attendance must be disclosed on each college’s website, an improvement over the current lack of consistency.
  • The Income Protection Allowance (IPA), which is the portion of income shielded from the SAI calculation, will increase for both student and parent income. This change will allow more families to qualify for need-based aid, and also removes much of the disincentive against student part-time employment.
  • The rules around divorced or separated families will change significantly. Under the old law, the custodial parent (whose information was required on the FAFSA) was defined as “the parent you lived with more during the past 12 months.” Under the new law, the parent who provides more financial support will be the parent required to report income and assets on the FAFSA.
  • Students will no longer be required to report “money received or paid on your behalf.” This means that distributions from grandparent owned 529s, or cash gifts from relatives will no longer be reported as student income, and will have no bearing on the SAI calculation.
  • Male students are no longer required to register with the Selective Service in order to file the FAFSA.
  • Removal of the “sibling discount,” which divided the parent assessment by the number of family members in college. Under the old law, parents with 2 kids in college had their EFC reduced by almost 50% and were more likely to qualify for aid, but this reduction is eliminated. This change is a huge blow to families with kids attending college at the same time, and there are currently major petitions underway to have it changed.


It’s a lot to wrap your mind around, especially if you are brand new the world of college financial aid. But fear not – we are here to provide guidance, and if you are a family that may be affected by these changes, please contact us for guidance.