Student Aid Index | What you should know about the grant changes

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For decades, the Expected Family Contribution (EFC) has been an important number for all students and their families as it takes into account the cost of college.

However, the FAFSA Simplification Act changes everything by replacing the EFC with the Student Aid Index (SAI).

Although the law was passed in 2021, the changes will not be implemented until the 2023-2024 academic year. The delay allows the Department of Education to prepare for the changes. Here’s what you need to know about the EFC and its replacement.

What is the EFC?

The EFC (Expected Family Contribution) is a number that is set by the federal government and universities through the FAFSA. Essentially, it is the dollar amount a family is expected to pay for college within a year.

Your EFC will determine how much needs-based financial support such as B. Subsidized Loans and Pell Grants, is an option for you. For example, if your school’s annual tuition is $ 15,000 and your EFC is $ 5,000, you can qualify for on-demand assistance of up to $ 10,000.

It often turns out that a family’s EFC (the amount of educational costs they are supposed to cover from their own resources) is way beyond their financial reach. When this happens, parents and students may turn to merit scholarships or unsubsidized student loans to help fund the difference between the EFC and what they can actually afford.

connected: Understanding Subsidized and Unsubsidized Student Loans

Why is the EFC being replaced?

The EFC is being replaced by the Student Aid Index (SAI). Both are calculated by formulas with information derived from the FAFSA form. The main reason for the change is to better reflect the real costs of the universities.

In the past, many families have interpreted the EFC as the total cost they are expected to pay. However, many face higher costs because colleges do not meet the full needs of students or take out loans as part of the grant package.

In addition, some college graduates have problems with the term “expected family contribution”. EFC critics say the term puts undue pressure on parents to fund their children’s college expenses.

The new term “Student Aid Index” cannot erase the feelings parents face when faced with the costs of higher education. But it can allow parents and students who are paying for college to approach the financial challenge with less perceived expectations. With a more general tenure, parents may not feel solely responsible for funding their child’s higher education.

What is the Student Aid Index (SAI)?

Due to the confusion of the EFC, the legislature decided to make a change. However, the reality is that the change is mostly in the name.

The basics of the formula used to calculate the resulting number remain unchanged. However, the FAFSA Simplification Act has made some updates to the formula that will change the way colleges calculate a student’s financial needs.

How will the SAI change the FAFSA?

The FAFSA Simplification Act has been incorporated into the Consolidated Funds Act of 2021. The aim of the new law is to make things easier for students and parents who pay for college. Let’s look at some changes to the formula.

Optimized FAFSA form

A major change is an optimized FAFSA form. Instead of answering over 100 questions, the FAFSA consists of just a few dozen questions. This should save students and parents time applying for financial assistance.

Changes in participation costs

The cost of attendance (COA) is another important number when sorting out college costs. Here are some of the changes, including the new law:

  • A student does not need to attend school at least part-time to be eligible to rent or purchase a PC. The student can be enrolled for this allowance at any time.
  • Transport costs between home, school and work are permitted. A college grant administrator determines the actual transportation allowance.
  • A student must be at least half enrolled to receive a Personal Expense Allowance.
  • Room and meal allowances must be broken down into separate room and board allowances. Meal allowances must be based on three meals a day.
  • Housing benefit for students living in a college-run or operated dormitory is based on the higher of the average or median housing costs.
  • Housing benefit cannot be set to zero for students living at home with their parents.
  • There is no allowance for private student loan fees.
  • A federal loan fee allowance for student and parenting is mandatory and is not at the discretion of a college.

Multiple students are treated differently

In the past, families with multiple students attending college at least part-time at the same time received special treatment. The parental rating was divided by the number of family members in college.

Independent students had their family dues divided by the number of students attending college at mid-term.

The SAI is not divided according to the number of students within a family. This means that middle- and high-income families can miss out on earlier savings opportunities.

New Pell Grant entitlement

Eligibility for Pell Grants is based on a multiple of the poverty line. Households with an income between zero and 175% to 400% of the poverty line can qualify. In addition, incarcerated students are eligible for the Pell Grant.

A negative SAI is possible

If the student is eligible for the federal maximum Pell grant, the Student Aid Index is set to 0. However, the formula for financial aid may allow an SAI below Zero as low as – $ 1,500. This can help colleges more accurately determine a student’s financial needs.

Final thoughts

While we haven’t addressed every single change created by the FAFSA Simplification Act, the real question is whether the changes will help more families and students.

The answer likely depends on your situation. Many of the changes appear to be helping low-income families with college expenses. While middle- and high-income people may get less help from the new index, especially if you have multiple children in college at the same time.

In addition, changing the name from EFC to SAI can help alleviate some of the expectations of parents. And almost anyone can agree that a streamlined FAFSA form is a win-win.

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