Capital InsightsFinancial Planning

Changes to FAFSA coming down the pike

The excitement and pride that stems from having a child is often the most significant aspect of one’s life, and rightfully so. One thing many families plan for is funding education for their children, specifically college.

With college tuition rates as high as they are these days, we recommend that parents consider applying for federal student aid, even with existing and planned savings. The government offers federal grants, work-study, and loans through the Free Application for Federal Student Aid (FAFSA).

One can apply for FAFSA October 1st in the year in which their child is a high school senior for the following year. So, for academic year 2023-2024, the FAFSA application will be active on October 1, 2022. The information on the form has a two-year lookback period so applicants filling out the form in October 2022 would use tax returns filed for 2021. In past years, this form’s length and complexity may have been discouraging factors for some families.

However, in a bipartisan effort in December 2020, Congress passed a legislative package that included the FAFSA Simplification Act, making some notable adjustments related to financial aid for higher education. The bill was originally supposed to go into full effect beginning July 1, 2023, but some provisions were pushed back to 2024 by the FY 2022 Spending Bill.

Some changes that were made are:

  • The number of questions on the form will be reduced from 108 to 36, making it far simpler to fill in, with a lot of information being directly pulled from the IRS Data Retrieval Tool.


  • Students can see if they are Pell Grant-eligible based on income and family size before applying for financial aid. For academic year 2022-23, the maximum award amount is $6,895, this amount could be adjusted for the next academic year 2023-24.


  • It is also now available to those students who had drug-related convictions or didn’t graduate because their school closed.


  • The financial aid process for former foster care students and students suffering from homelessness will become more accessible.


  • Previous versions of FAFSA utilized a metric known as the Expected Family Contribution (EFC), which represented the amount that the government believed a family could contribute towards the cost of attendance for college. This has been replaced with the Student Aid Index (SAI), which is a number used by educational institutions to determine whether federal aid is available.
    • The lowest a student can receive based on the SAI is -$1,500, as opposed to $0 with EFC. This will help distinguish among students who need exceptional aid vs. students who do not.
    • In addition, the SAI allows for financial aid administrators to make cost adjustments based on the current financial situation of the student’s family. This could include changes in circumstances such as unemployment, national emergency, or professional judgement of the officer. This case-by-case process will help to allocate the proper amount of financial aid to each student.
    • One can get an estimate of the SAI at


  • Income protection allowance changed to protect a greater percentage of earned income than before, shielding more of students’ and parents’ income from being counted when determining how much can be put toward college.


  • If the parents of the student are divorced or separated, financial aid will be based on the parent who the child lived with the most in the preceding 12 months and which parent provided the most financial support. If the custodial parent remarries, the stepparent’s information will also be included on the FAFSA application. Additionally, if the child’s parents are divorced, are separated, or were never married, but live together, both are required to provide information on the FAFSA.


  • Multiple children “discount” for children attending college at the same time – which existed in the old FAFSA form – has been discontinued with the new application.


  • Any savings done by outside family members in separate accounts (typically grandparent-owned 529 plans) will not have to be reported assets on the application. This change can have a significant positive impact on the amount of aid received by a student.


Please note that there is a deadline for submission of the FAFSA form, too – typically June 30 of the following calendar year. Many colleges and states may have earlier deadlines for applications to allow for maximum consideration. So, an application filed at the earliest possible time will reap the greatest benefits to the child’s family.

Note that you can get the most up to date information about FAFSA and the implementation of the latest revisions at We recommend reaching out to your financial advisor to determine the impact of college costs to your financial plan.