FAFSA Changes

Students and Parents will be completing the FAFSA form and application for the school year 2022-2023 which will become available on October 1, 2021.  Families will be using the tax information from the tax year 2020 due to the rule called Prior Prior.   This year there are a few FAFSA changes that people need to review before they begin to complete this form.

In addition to the FAFSA changes, the family’s financial changes resulting from the COVID virus could have a more significant impact on a family’s financial aid position this upcoming year.  This is due to the timing of the income information used in the FAFSA submission as stated above.  Many families who were impacted by COVID will need to appeal to each college that the student applies to. The proper timing strategy of the appeal is explained below.

2022-23 FAFSA Major Changes

There were a few FAFSA form changes for this year.  Most of them were wordsmithing of the existing questions to improve clarity.  There were also many cosmic upgrades between the different versions to make the form similar across the entire platform.  The major consumer processing rule changes are:

  • Elimination of Subsidized Usage Limit Allied rule (SULA)
  • Negative consequence related to a drug conviction
  • Requirement of males answering selective service question
  • Increased transparency and availability of Pell Grant Amounts

The last three changes do not need much explanation yet many people are unaware of the SULA rules.  There was a limit for students to get no more than 150% of the program length in direct federal subsidized loans periods.  This mainly affected lower-income students, community college transfer students, and adult learners who extended their graduation date.  With this change, more students will qualify for subsidized loans.  To receive a subsidized loan, the student must have financial need and the interest on the loan is paid by the government while the student is considered a full-time student in school.

Parent Asset Allowance Change

Each year the FAFSA calculation has adjustments to the allowance tables.  This year’s parents’ asset protection allowance table increased slightly.  These allowances are for both parents and independent students.  As a result, the EFC number will improve and less of the parent’s assets will be included in the calculation.

Simplified and Zero EFC Change

To qualify for a simplified or zero EFC, the person or parent must have used the 1040 form without the submission of a Schedule 1.  The 2022-23 FAFSA income limit remained the same at $27,000.  There are other requirements to qualify for a simplified or zero EFC.  The major advantage is a parent’s assets are not counted when a Zero EFC is used.

FAFSA Simplification

Within the Consolidation Appropriation Act were new laws related to FAFSA Simplication.  Some of these items had been discussed for years among higher education and the Department of Education. These changes will be phased in over the next few years.  The Department of Education has already announced a delay in full implementation due to the technical upgrade requirements.  Full implementation is not expected until the school year 2024-25.

Two of the future changes that will affect most families are the implementation of income automation and the loss of the multi-child discount in the EFC calculation.  The multi-child discount is significant for this year’s high school seniors because the amount will change as they progress through college.  In the future, that family’s EFC will go up and may eliminate the possibility for that aid starting in the school year 2024-25.  See the table below to help you understand the timing.

FAFSA Simplication Chart Changes

Increase Use of Data Retrieval Tool or DRT For FAFSA Simplification

As part of this simplification, the Department of Education is utilizing the DRT function more.  It is expected by the school year 2024-25 that the income items will be directly fed to the FAFSA via the IRS system.  It will be based on the FSA ID and how the student and family file their taxes.  For security reasons under current rules, this will be a blind submission meaning you will not be able to see the numbers or correct them.

We saw the start of this progression last year.  If the DRT was used, a FAFSA filer is unable to see their income numbers and only a college financial administrator could make changes.  It is our recommendation for first-time filers to manually input their income numbers so that they can see the Expected Family Contribution or EFC number that the FAFSA generates.    The family will still need to submit the FAFSA using DRT but by using the initial manual process, a family will be able to compare submissions and see if there are any possible issues.

COVID Impact on FAFSA

The biggest issue for both the colleges and families will be the financial impact of COVID.  For those families who have been financially impacted, they will need to do more work to properly reflect their financial aid positioning change.

Depending on the change, each student’s FAFSA submission will need to submit a financial appeal.  You need to contact the financial aid office or visit their website since more colleges have a formalized appeal process that needs to be followed.

As COVID has been a burden for many families, this could be a major resource issue for the college’s financial aid staff.  PayForED developed a methodology to assist you in your financial aid appeal that is a good guide.

The other issue facing families is the difference between returning students and entering freshmen.  The timing and process of the appeal are important.   Contacting the college is a good idea.

COVID Impact on FAFSA for Returning Students

For returning student college students, the appeal should be done in February after the FAFSA is submitted.  In many cases, you may want to wait until after you have your 2021 taxes completed since this will allow you to show the college the full-year change.

This will require families in this situation to be organized and get their 2021 taxes completed as soon as possible as part of their appeal.  These additional adjustments could be on a first-come, first-serve basis.

COVID Impact on FAFSA for Entering Freshman

For entering freshman families, the strategies are different.  A family’s ability to pay is part of the admission process.  What most families do not understand is a process called enrollment management.  This is where the admission office and financial offices come together in the acceptance process.

It is our recommendation, that if your income has been impacted by COVID not to make this known to the college until after the initial acceptance and award letter is received.  By taking this approach, it will increase the child’s chances of being accepted to each of the colleges that they apply to.

During this time frame, the family should be investigating the appeal process at each college and preparing their financial appeal.  As stated above, anticipate that the colleges will have a significant increase in these appeals for the upcoming students for both the entering freshmen and returning students.

I would also recommend that you have this financial discussion with your child.  Our College Cost Analyzer creates an environment that allows a family to review the student’s colleges by comparing cost and possible debt in an easy to read format.

FAFSA Summary for 2022-23 

These changes will help the students and parents better navigate the FAFSA submission and admission process.  The entire admission approach is changing for both families and colleges due to COVID.  If you are seeking additional insight on how the EFC will impact your financial aid and the net cost of each college, visit our College Cost Analyzer and In College Payer.

To help families navigate the FAFSA submission and college funding decision, we are hosting a series of Virtual Financial Aid Nights.  These are six separate events covering financial aid positioning, college saving plans, student loans, and understanding the award letter.

 

Share this on

FAFSA Changes

Students and Parents will be completing the FAFSA form and application for the school year 2022-2023 which will become available on October 1, 2021.  Families will

Read More »
Search Posts
Archives

Stay current with us

Join our mailing list and we will periodically send you insightful information concerning the world of college financing. You will also receive our informative newsletter. We will never share your information with anyone.