Beyond Bulls & Bears

College Savings

The new FAFSA: What every advisor, parent and student should know

Recent legislative changes will impact the student financial aid process and could create stress and confusion. Dr. Peter Mazareas, author, college financing expert and Co-Founder of Invite Education, shares some need-to-know information for parents, students, and financial advisors.

In 2021, Congress enacted legislation which directed the Department of Education (DOE) to simplify the Free Application for Federal Student Aid (FAFSA) form. Typically available in October for the coming academic year, the revised and simplified FAFSA will be released in December and will substantially change how financial aid eligibility is calculated. Given the changes detailed below, the delay could create confusion and stress for those families applying for financial aid, whether for a high school senior or a returning college student.

We think it’s important for financial advisors, parents and students to understand the changes and the steps they should take now—and in the future—to enhance their ability to maximize their financial aid eligibility.

Some key highlights and changes to know about the new FASFA:

  1. The number of questions will be reduced from 108.
  2. A new eligibility formula and calculation, the Student Aid Index (SAI) will replace the Expected Family Contribution (EFC).
  3. Cost of Attendance (COA) reported by schools has been redefined, substantially expanded and standardized to reflect true cost.
  4. The FAFSA Submission Summary replaces the Student Aid Report.
  5. Automatic transfer of IRS tax returns from IRS directly to the FAFSA.

Some of the most impactful changes

In addition to fewer questions, there are numerous substantiative changes in the 2024/25 FAFSA and the underlying methodology used to determine financial aid eligibility. The following are some of the most impactful and significant changes made to the new FAFSA. Understanding these changes and how they will impact current and future student financial aid is important for college planning and funding.

  • 529 college savings plan assets in grandparents’ or other family members’ accounts will no longer be reported on the FAFSA and therefore, 529 assets will have no impact on financial aid calculations.
  • Several sources of untaxed income will no longer be reported as income, such as veterans’ benefits, workers’ compensation and cash child support by a divorced parent as well as contributions to 401(k)s and 403(b)s. (Note: SIMPLE and SEP contributions will continue to be assessed as income.)
  • Less aid for multiple children in college. The number of children in college will no longer be reported; therefore, the parental contribution of the SAI (formerly EFC) will no longer be divided by the number of children enrolled in college.
  • For students with divorced and separated parents, the parent responsible for providing information on the FAFSA will be the parent providing more financial support to the student, instead of the parent with whom the student resides most of the time.
  • For small business owners and for families that reside on a family farm, their “asset exclusions” have been eliminated. Going forward, they must report their assets on the FAFSA.
  • Cost of Attendance (COA) has been redefined and substantially expanded to include an accurate COA. It will now include tuition and fees, housing and meals (previously called room and board), books and other course materials, transportation, personal expenses, loan fees and costs associated with obtaining professional licensure, certification or credentials.

The table below indicates how the change in methodology will benefit some students (increase financial aid) and disadvantage others (decrease financial aid).

It is important to emphasize that students from high-net-worth families can benefit from filing a FAFSA. There are many types of student aid programs available from federal and state governments and from colleges, including loans, grants and merit awards which require the filing of the FAFSA. For example, all students regardless of income are eligible for a Direct Student Loan. Most colleges require a student to submit a FAFSA before they award institutional aid including grants, loans, and merit awards.

With the December launch delay and since institutional aid is on a first-come, first-serve basis, a student can increase their chances of maximizing financial aid awards by filing as early as possible. An additional benefit in filing early is that a student will have more time to negotiate and appeal a college’s financial aid decision and thus be able to compare college aid packages before the college’s decision deadline for matriculation.

Finally, we would emphasize that understanding how the timing of family finances impacts potential financial aid is key to sound college planning. Financial information required on the FAFSA is based on the “prior-prior” tax year (referred to as the base year). For example, the 2024–2025 FAFSA—and thus financial aid awards—will be based on income information from the 2022 tax return. Although it’s too late to change one’s 2022 tax returns, families should understand how these changes will impact them this coming year if they have a student currently in college and in the future. We recommend taking proactive financial and tax planning steps now to maximize their financial aid eligibility in the future.

Don’t wait for the FAFSA release. Steps to take now:

    1. Go to here and create an FSA ID for the student and filing parent. Both will need an FSA ID to complete the FAFSA.
    2. Identify the parent(s) who will provide financial information and tax returns.
    3. Make sure tax forms for 2022 have been filed with the IRS for both the student and parent as 2020 tax return information is required to complete the FAFSA.
    4. Know college and state FAFSA filing deadlines, as some are as early as January 15, 2024. If you miss the college’s deadline, you will not qualify for financial aid.
    5. In advance of the December FAFSA release, and after, parents and high school students can use the free SAI estimator at to get an approximate indication of how much need-based financial aid they may qualify for and therefore how much they will have to pay to attend a particular college. This can be a critical step in deciding which colleges to apply to as awards will vary from college to college.


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