The changes mandated by the Free Application for Federal Student Aid (FAFSA) Simplification Act, passed in December 2020, represent a significant overhaul of the federal financial aid process. Through a grant-funded partnership between the State Higher Education Executive Officers Association (SHEEO) and the National Association of State Student Grant & Aid Programs (NASSGAP), SHEEO used national- and state-level data to explore and assess how FAFSA simplification will affect specific states, sectors, and subpopulations of students, both in regard to Pell Grant eligibility/awards and state grant eligibility/awards, as well as the unintended consequences of the FAFSA Simplification Act.
The FAFSA Simplification Act includes several positive factors that will expand access to federal financial aid. However, some changes to the federal methodology may shift a student’s eligibility in ways that are not yet known. At the state level, need-based financial aid programs are often directly connected to the federal financial aid process because they rely on data elements from the FAFSA and model their eligibility requirements on Pell eligibility.
SHEEO explored the changes in the Student Aid Index (SAI), the new formula for determining aid, and how it compares to the previous Expected Family Contribution (EFC) formula. Crosstabulations were conducted for dependent students and independent students.
The results of this research suggest that at the national level, nearly 220,000 net students would gain Pell eligibility in 2023-24, equivalent to a net increase of over $617 million in Pell Grants. Coupled with the changes in Pell Grant awards for previously eligible students, total Pell Grant awards would be expected to increase by approximately $7.85 billion in 2023-24.
While most students will see expanded eligibility and award levels, some uncertainties remain. Students with more than one family member in college may experience increases in SAI relative to EFC, and corresponding decreases in Pell eligibility and award amounts. These students make up some of the approximately 56,600 students that are anticipated to lose Pell eligibility.
Simplification may also pose challenges for state grant programs. The results of this research at the national level suggest that many students will have lower expected out-of-pocket costs for postsecondary education as indicated by the lower SAI values relative to EFC. Pell Grants may fill a large portion of this additional need, but many students will have unmet financial need that can be fulfilled through state grants or federal loans.
Read the full FAFSA Simplification brief online at https://sheeo.org/wp-content/uploads/2023/10/ImpactsofFAFSASimplification.pdf.
