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Higher Ed Dive
What financial aid offices need to know about legislative changes ahead
The government spending package signed late last year expands access to
federal aid for many students, but some could require more support.
Nancy Mann Jackson
Feb. 19, 2021
The government spending package passed at the end of 2020 included
several provisions intended to extend federal financial support to more
college students.
College access advocates have long campaigned for the simplification of
financial aid regulations and the Free Application for Federal Student
Aid. They hope doing so will encourage more students to apply for aid.
Only about 60% of high school seniors complete a FAFSA, according to
data from the National College Attainment Network. So far this year,
those numbers are down almost 10% overall and more so for students from
historically underrepresented groups, NCAN found.
A number of the changes advocates have pushed for are now written into
law through the spending package and will take effect for the 2023-24
school year. Financial aid experts say offices should start examining
the policies now to determine how they will affect their students and
award processes.
The new policies have promising potential for the long term, said Helen
Faith, director of the Office of Student Financial Aid at the
University of Wisconsin-Madison.
"The changes to the financial aid application process will open doors
that were previously closed or seemed inaccessible to some students,"
Faith said, adding that they "represent a net positive for our national
economy and security as we provide pathways to education and economic
stability for populations that were previously excluded."
A look at the changes and their impact
The sweeping changes fall into four main categories, and each one is expected to have an impact on students and their families.
A simpler FAFSA. The form will be much shorter and simpler, which is
expected to encourage more students to complete it and get the aid for
which they qualify. In addition to reducing the number of questions by
about two-thirds, the new FAFSA will not require aid applicants to find
and report income data, as that information can now be automatically
transferred from the applicant's tax return information directly to the
FAFSA, with applicant consent.
"Students often are intimidated by the application and these changes
will simplify the process, which should result in our institutions
assisting and serving more students," said Dena Norris, associate vice
chancellor of student financial services at Metropolitan Community
College, in Kansas City, Missouri.
Expanded eligibility for Pell Grants. The new legislation lifts a ban
on issuing Pell Grants to incarcerated students and to students
convicted of drug-related offenses.
All students from two-parent families with income below 175% and single
parents with income below 225% of the federal poverty level should
receive a maximum award. These changes will allow an additional 1.7
million students to qualify for the maximum award each year, according
to The Washington Post.
More predictable financial aid awards. Students and families will have
a new tool they can use to quickly estimate their eligibility. It uses
the simplified formula for determining aid and is based on three
factors: dependency status, number of parents in the household and
adjusted gross income as a percentage of the federal poverty level.
Families will be able to plug data about the three criteria into a
forthcoming automated tool, which will quickly provide an estimate of
the aid amount a student might receive. (One notable change: The
formula will no longer consider the number of college students in the
household.)
Rebranding the EFC. Students who qualify for aid traditionally saw an
Expected Family Contribution noted in their student aid package.
Because the figure was not a measurement of what a family could or
should pay but rather an indicator of eligibility for aid, it has been
renamed as the Student Aid Index. For the first time, this figure can
be negative — as low as -$1,500 — to help institutions see which
students are most in need.
The SAI formula will change slightly. While more students will gain
Pell Grant eligibility than will lose it under the new formula, some
middle- and higher-income students could end up paying more, said Jill
Desjean, a policy analyst at the National Association of Student
Financial Aid Administrators.
How the changes affect financial aid offices
The updates included in the new legislation will simplify work for many
financial aid professionals. For instance, with IRS files automatically
linked to FAFSA, verifying income will be much quicker and easier.
That, in turn, will allow financial aid offices to spend less time on
paperwork and more time advising students, Desjean said.
Although the simplified FAFSA will provide financial aid officers with
less financial information about each family, the new SAI calculation
that allows a negative number will offer a way to discern between the
neediest students. UW-Madison's Faith said that granularity will enable
states and institutions to "more surgically" target their limited
need-based funds.
The SAI will also make it easier for colleges to give families an idea
upfront of how much aid they are likely to receive, said Kathy Ruby,
principal of financial aid partner success at consultancy EAB. "Any
time we can provide students and families with earlier and clearer
information about the aid they are eligible to receive, that's a good
thing," Ruby said.
And having that information earlier in the process enables students and families to make college decisions sooner, Norris said.
Financial aid offices may need to reassess their institutional aid
programs, however. "Some may find that their students receive more
generous federal support overall, reducing reliance on student loans,"
Faith said. "Other institutions may need to increase institutional aid
budgets in order to continue meeting the same proportion of financial
need that they have committed to historically."
For example, lower-income students may be able to access additional
federal aid as a result of the new policies. But for middle- and
upper-income students, the most significant change in the new
calculation is no longer counting the number of college students in the
household. Traditionally, the number of college students in a family
has been included in the formula for determining aid, meaning that
families with more than one child in college at the same time often
qualified for more aid per student than if their children were in
college at different times. Institution sources said they will continue
to provide the same amount or more aid to students, but it's too soon
to know how that aid will be distributed.
"Colleges will need to carefully examine how this will impact both
state and institutional aid for their students, and then plan
accordingly," such as by allocating more institutional aid to students
who have siblings in college simultaneously, Ruby added.
Financial aid administrators have some time before the changes take
effect, but there's plenty of work to do to get ready. Ruby recommends
aid officers start conversations now about what data needs to be
studied, such as how their institutions' student populations will be
affected by various changes. That will set up schools to approach
future aid policy in a way that helps students and the institution.
Also, colleges will need to plan for updating institutional
publications and websites that refer to the EFC formula, Desjean said.
And aid officers should familiarize themselves with the tools that
become available for predicting Pell Grant eligibility, so they can
help publicize their availability and be on the same page as students
if they have questions about their estimated award.
"Aid offices are critical partners in meeting national workforce needs
through accessible, affordable and high-quality educational
opportunities," Faith said. "Aid administrators should be included in
high-level discussions to support colleges and universities in this
important work."
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