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FAFSA Times!

Those of you with college-age children or grandchildren are probably aware of the FAFSA form you must complete for financial aid. For those of you who do not have college-age children, please feel free to forward this to family and friends who may find this helpful.

Some significant changes are coming to the FAFSA form that can affect financial aid and scholarships for families with children either in or entering college or trade school. So, what is it, and what’s changing?

The FAFSA, which stands for Free Application for Federal Student Aid, is a form provided by the U.S. Department of Education that students (both undergraduate and graduate) and their families fill out annually to determine eligibility for financial aid for higher education. This aid can include grants, scholarships, work-study opportunities, and loans.

The information provided on the FAFSA is used by colleges, universities, and other educational institutions to determine a student's eligibility for various types of financial aid, including federal, state, and institutional aid programs. The form considers the students' and their families' income and assets.

Completing the FAFSA is typically one of the first steps in the financial aid process for students pursuing higher education in the United States. Students must fill out the FAFSA each year they plan to attend college to be considered for financial aid for that academic year.

What’s changing: The FAFSA Simplification Act

The FAFSA Simplification Act significantly changes the underlying processes and methodologies for determining federal student aid eligibility.

Submitting the new FAFSA if you or your child could be in college next fall is essential. It unlocks federal, state, and school-based financial aid, including student loans, need-based grants, work-study, and some scholarships.

Here are some of the most significant changes to the new FAFSA process:

1. All contributors need FSA IDs

Each person who submits information on the form is called a contributor. This could include the student, the student’s spouse, one or both parents or the parent's spouse. Each contributor will need a unique FSA ID to log in and complete the form. 


2. Different parents may need to fill out FAFSA.

There are new rules for divorced parents. The parent who provided the most financial support for the student over the last 12 months will be the FAFSA contributor. If this parent is remarried and didn’t file their taxes jointly, their spouse will also be a contributor. Previously, the information of the parent whom the student primarily lived with was used, regardless of whether they provided the most financial support. 


3. IRS imports tax information

All contributors must agree to allow the IRS to import their federal tax information to the FAFSA directly. This is intended to make it easier for families to complete the form. 


While a student can submit their FAFSA, if any contributor doesn’t consent to this process, they won't be eligible for student aid. 


4. The Student Aid Index (SAI) replaces Expected Family Contribution (EFC)

The SAI will now determine a student’s ability to pay for college and the amount of financial aid they can receive. 

The information included on the FAFSA determines the SAI, an index number used by college financial aid offices to calculate need-based financial aid. The student’s needs will be calculated by subtracting your SAI from the school’s cost of attendance. 


5. Sibling discount removed

Families no longer get a break from having multiple children in college simultaneously. However, some colleges may still consider this factor when determining institutional financial aid.


6. Fewer questions

The new FAFSA has fewer questions; some lucky students will only have 18, down from the 103 questions on the previous form. 


7. Pell Grant award expands

The need-based Pell Grant gives students free college aid that doesn’t need to be repaid. With the new FAFSA formula, 610,000 additional students from low-income backgrounds will be eligible for Pell Grants who were not before. 1.5 million students will be newly eligible for the maximum Pell award of $7,395 per year.

What does this mean for college savings or 529 Plans? 

The plan is good news for parents with 529 plans and great news for grandparents with plans.

Previously, any money that grandparents gave a grandchild for college had to be reported as student untaxed income on the FAFSA, potentially lowering the student’s eligibility for financial aid. Under the upcoming changes, any distributions from a third party-owned 529 need not be reported to the FAFSA.

For parents, a maximum amount of 5.64% of their assets (including all 529 plans across multiple children) is counted when determining the student's SAI. For example, if a parent has $10,000 in reportable 529 plan assets, the college will assume the family had $564 to pay for college, so the student’s need-based financial aid package would be reduced by $564. 



Contact your college’s financial aid office if you need additional help completing the 2024-25 FAFSA. If you’re a prospective college student, contact your high school college counselor or the financial aid offices of the schools you’re applying to.


As with any financial matter, please contact your Charter Oak Financial Advisor if you have any questions. And if your grandchildren are going through this process, please know we are glad to help them as well.

FAFSA Changes: https://studentaid.gov/articles/fafsa-changes-coming/

FAFSA FORM: https://studentaid.gov/h/apply-for-aid/fafsa

And finally, Charter Oak is pleased to announce the promotion of Emma Bean, CFP® to Partner and Senior Financial Advisor, effective January 2, 2023. Please click here to read our press release announcing the promotion. 

As always, it is our pleasure and privilege to serve you, and to be a calming and confident voice when seas get rough. We thank you for being our clients and welcome your comments and questions.