As students and their families fill out the Free Application for Federal Student Aid (FAFSA), some will notice its complete redesign, reflecting the most significant overhaul in decades. The FAFSA changes a little every year, but courtesy of the 2020 FAFSA Simplification Act, these changes are bigger and are in effect for the 2024–2025 academic year and beyond.
Colleges use the FAFSA to determine how much your family should be able to pay for college, along with eligibility for grants, work-study, federal student loans, and sometimes merit scholarships. To be considered for available aid, you need to fill it out. Students who have never filed the FAFSA don’t know what came before, but for students in college already, the changes could come as a happy or unhappy surprise. Here’s what to know about some of the biggest changes.
Basic changes
Before diving into the more in-depth changes that require more explanation, let’s run through a few straightforward updates you can easily file in your notes for later.
- Different opening date: Because the FAFSA has undergone major changes, its opening date has shifted in recent years. While the form typically becomes available around October 1, recent cycles have opened later or earlier as the new system has been implemented. Families should keep an eye on official announcements each year to confirm the exact release date.
- Fewer questions: The application has shrank from 108 total questions to fewer than 40 (and often even less). That’s a big deal for reducing barriers for families trying to complete it with little prior knowledge—and a primary reason for the simplification.
- Custodial parent definition changes for divorced families: The FAFSA now requires information only from the parent who provided the most financial support to the student in the past year, rather than the parent the student lived with most of the time. Remarried parents still need to report stepparent income.
- IRS data retrieval now mandatory: On the old FAFSA, the IRS Data Retrieval Tool (DRT) was optional. On the new form, the IRS Direct Data Exchange (DDX) is mandatory, which is more convenient for families.
Now that you have some of the basics, let’s dive into the more complex changes.
Related: Things You Need to Do Before Filing the FAFSA
“Expected Family Contribution” changing to “Student Aid Index”
The FAFSA used to calculate an Expected Family Contribution (EFC), a number many families mistakenly interpreted as the amount they would have to pay for college. Under the FAFSA Simplification Act, this number has been replaced with the Student Aid Index (SAI). The SAI is not a bill or a required contribution — it’s simply the figure colleges use to determine a student’s eligibility for need‑based financial aid. Because the SAI can even be negative, it offers a clearer and more flexible way for colleges to assess financial need without implying what a family can or must pay.
New formula increasing Income Protection Allowance
What is new and noteworthy about the SAI is the formula used to generate it. For many families, their SAI will be lower than the previous EFC formula, increasing eligibility for financial aid. Why? The new formula increases the Income Protection Allowance (IPA), ensuring more income is protected from being counted toward the SAI. Parent and student IPA amounts rise each year with inflation, protecting more income and expanding eligibility for need‑based aid.
However, not all families benefit equally. Because the new formula no longer gives a discount for having multiple children in college, and because small‑business and farm assets are now included, some families may see a higher SAI than before.
Small business and family farm values no longer excluded
On the old FAFSA, parents who owned businesses with 100 or fewer employees or family farms didn’t need to report their business value or the value of the farm the family lived on. On the new FAFSA, you must report the net worth, and the change could raise your SAI—possibly significantly. “It’s going to hurt farming families who maybe have a million dollars’ worth of equipment but only make $60,000 or $70,000 per year,” says Luanne Lee, owner of Your College Planning Coach. It’s even worse for farm families with multiple students in college (more on that below). Several bills have been introduced to restore the small‑business and farm exemption, but none have passed yet.
Related: All the Important Financial Aid Terms You Need to Know
Siblings in college no longer receiving increased aid
Under the old FAFSA, a family’s EFC was reduced when multiple children were enrolled at the same time. Under the new FAFSA, the SAI is not divided, so each student receives a separate SAI based on the same parent financial information. This shift means many middle‑income families with two kids in college may qualify for less need‑based aid.
“Families in the $80,000 range who would have fallen outside of Pell Grant eligibility with one child in college might just dip into that range with two,” says Jill Desjean, Senior Policy Analyst for the National Association of Student Financial Aid Administrators (NASFAA). "For 2024–2025, they could lose their Pell eligibility." They may also lose institutional aid. According to the Brookings analysis, “Students with siblings enrolled in college with a family income of $120,000 may need to pay roughly $10,000 more to attend either a public or private institution.” Even families in the $70,000 range may be negatively affected. Low-income families generally won’t be. (Please note that sibling discounts may not be affected at schools using the CSS Profile, another financial aid form required by some colleges. Some schools plan to continue using the old formula, while others say they don’t know yet.)
Expanding Pell Grant eligibility
The new SAI formula is more generous than the old EFC system, and as a result, more students qualify for a Federal Pell Grant. Under the old formula, the lowest possible EFC was zero; under the new FAFSA, the SAI can go as low as –1500, which maximizes Pell eligibility. Families who aren’t required to file a tax return generally receive this automatic minimum SAI once they provide consent for IRS Direct Data Exchange. The maximum Pell Grant ($7,395 in 2026–2027) is the same regardless of your SAI, but students in the negative could be offered additional state or institutional aid. “The increased IPA and expanded Pell eligibility are two of the biggest wins of this whole initiative,” Desjean says.
“The new formula ties Pell eligibility to adjusted gross income (AGI) and family size rather than EFC, which used to be a complicated calculation for families,” she adds. For 2024–2025, the AGI to qualify for a maximum Pell is $51,818 for a family of three. The new FAFSA formula also raises the income threshold from $50,000 to $60,000 for not having to report assets. That’s good for reducing your SAI and increasing your aid eligibility. The SAI formula means more students are also eligible for additional state and institutional aid. However, Lee notes that “Many schools, including ‘meets need’ schools, don't give aid in the form of all grants—free money—so a large component of need aid may be offered as loans.”
Some untaxed income off limits
Certain types of untaxed income no longer need to be reported on the FAFSA or are counted differently. That’s good for your SAI. Three notable changes are as follows:
- Child support is now reported as an asset: This has less impact on your SAI; if you fall below that $60,000 threshold and meet other qualifying attributes, you won’t need to report it.
- Contributions to retirement accounts aren’t counted: While 401k and 403b contributions aren’t reported, most IRAs still must be.
- Cash support isn’t counted: This includes examples such as money from a relative or a 529 contribution from a grandparent.
Related: The Best Advice and Resources for Filling Out the FAFSA
What you can do now
You won’t know your official SAI until the FAFSA is processed, but you can estimate it in advance with the College Board Student Financial Aid Quiz or the Federal Student Aid Estimator, which are both updating to reflect the new SAI formula. Knowing your SAI will help you determine schools that are a good fit financially. For families that have a student already in college and another heading in, contact your college’s financial aid office to ask if aid packages will be affected by the new formula. “If they can’t tell you, that could be a red flag for affordability,” Lee says.
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