When the FAFSA Simplification Act goes into effect this July, it is expected to significantly impact the financial aid application process, simplifying paperwork and changing the eligibility formula. However, there is little information on specific impacts at the national level. Now, the Association of State College Executive Officers (SHEEO) has begun to fill that void by releasing new data estimating changes to how student and family assets will be calculated and how much students will receive.
SHEEO based its analysis on national and state data from the 2017-18 National Postsecondary Student Aid Study, Administrative Collection. What they found was good news for potential aid recipients: Estimates of student and family financial resources will drop for many. It follows changes to the formula for calculating what was previously called the Estimated Family Contribution (EFC) but will be called the Student Aid Index (SAI) when it is introduced during the 2024-25 academic year. More than 45% of students in the data sample would experience a $1,000-$2,500 drop from EFC to SAI.
“We see that these changes are relatively positive for students,” said Dr. Rachel Burns, Principal Analyst at SHEEO. “The formula is getting more generous.
Lower SAI numbers will result in more students being eligible for Pell Grants. SHEEO calculated that nearly 43% of students in their data who were initially ineligible for Pell Grants would now qualify, an increase of more than two million students. That’s nearly double the percentage increase in Pell recipients estimated by the Office of Federal Student Aid. Nearly 85% of Pell-eligible students would see their award increase by up to $8,800, with the largest segment seeing an increase of $5,000.
That increase in eligibility could lead to even more support, according to MorraLee Keller, senior director of strategic programming at the National College Attainment Network.
“Many colleges in their packaging strategies focus the most aid on students who are Pell eligible,” she said. “So if you weren’t Pell-eligible before and now you are, it can bring in other forms of aid to help cover the cost of your college education.”
Keller also thought that improved access to Pell could also boost enrollment at community colleges that have been hurt by the pandemic.
“If you qualify for a full Pell Grant, in most states in the country, it will cover your tuition at your local community college,” she said. “You might be able to go to a community college, pay your tuition, have your books, etc. all covered by your Pell grant.”
SHEEO’s analysis also revealed that the EFC measure was crowding out large numbers of students at the lower end of the income spectrum. The lowest possible EFC is $0, but the SAI will include negative values up to -$1,500. SHEEO found more than 3.7 million students who had an EFC of $0 who would have a negative SAI under the incoming system.
“I was surprised at the number of students who had a $0 EFC who now have a negative SAI,” Burns said. “I think it really points to the fact that the EFC was lumping a lot of needy students into one category and there wasn’t enough differentiation between students who really needed more financial aid.”
This change could benefit lower-income students and qualify them for more state aid under current funding patterns. States can respond by adjusting their aid programs if they don’t want or can’t afford to pay more.
Not all students will benefit from the new formula. Students in certain categories, especially those in families with two or more members in college, students whose parents have a lot of property, and students whose families own farms or small businesses, may feel that their eligibility for aid is reduced. SHEEO’s analysis found that for 8.4% of students, the SAI would be higher than their EFC. At least 7.8% of students would have their Pell Grant reduced, and 8,060 would lose Pell eligibility altogether.
Some students may also have a higher SAI than the EFC, which could harm their eligibility for a state grant. States can still try to include those students, but Burns said it can be challenging.
“I think the goal would be to try to integrate students who are currently receiving aid so that no one loses it,” Burns said. “I think it’s likely that states will have to have very difficult conversations about what to do.”
SHEEO has developed a tool that states and researchers can use to explore their analysis. Users can see data broken down by state, affiliation, sector, gender, race, and number of family members at the college. They can also download more specific data.
But while students and their families may be eligible for additional aid, Burns stressed that the process is still difficult.
“There are still as many data elements. Students have to go through many hurdles. While a lot of that can come directly from the IRS, it’s still a laborious process,” she said. “It’s a simplified formula, but not necessarily a simplified form.”
Jon Edelman can be reached at JEdelman@DiverseEducation.com.