SHEEO releases new FAFSA Simplification Guidebook and FAQ to help guide states through financial aid challenges

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A new guidebook from the State Higher Education Executive Officers Association (SHEEO) was published online today to provide insights for state higher education agencies to navigate and understand both the benefits and implications associated with the change to a new simplified Free Application for Federal Student Aid (FAFSA) in regard to state financial aid. 

The 2024-25 Simplified FAFSA, rolled out by the U.S. Department of Education (ED) at the end of December, includes a new needs analysis formula. This change requires states to make alterations in how they administer their financial aid programs, such as updating their financial aid processing systems or altering their respective aid formulas to determine state aid eligibility.

While every state administers its financial aid programs in a different way, this new guidebook serves to highlight:

  • changes to the new FAFSA and needs analysis formula, 
  • ways in which students and their families may be impacted, 
  • issues associated with the new FAFSA that state agencies and legislatures may want to consider, 
  • and examples on how the new needs analysis formula alters the eligibility distribution for state aid programs.

The new guidebook examines how state aid could be impacted by the new Student Aid Index. SHEEO examined the design of four different state aid programs: first dollar scholarships, last dollar scholarships, eligibility based on an EFC/SAI threshold or Pell Grant, and eligibility based on adjusted gross income.

The intent of the changes to the FAFSA is to lead to expanded Pell Grant eligibility and higher award amounts, which prior research has demonstrated will occur. However, certain students, especially those from families with multiple members in college or families with a farm or business, may experience a loss of federal and state aid eligibility.

“The updated FAFSA and new needs formula offer states an opportunity to really examine their financial aid programs,” said Rachel Burns, SHEEO senior policy analyst. “States may need to adapt their grant and scholarship programs to ensure they continue to maintain the goal of promoting college access and success.”

State higher education agencies are working to develop processes to award aid in a timely manner, but they are not anticipated to receive necessary FAFSA data elements from ED until mid-March. States will need to work with postsecondary institutions on communication strategies to inform students and their families that postponement in awards is due to the delayed release of the FAFSA.

The 2024-25 FAFSA delay and ongoing issues are causing frustration within the higher education community. SHEEO will continue to advocate for its members and share concerns with the U.S. Department of Education in pursuit of timely solutions to minimize confusion and hardship for students and families. 

On a new webpage with frequently asked questions, SHEEO will update states on how to troubleshoot known issues on the form and ways peer states have moved forward. 

Find the new FAFSA guidebook and a link to the FAQ webpage at https://sheeo.org/project/fafsa-simplification/.

New SHEEO brief details national and state impacts of FAFSA Simplification

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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.