What financial aid offices need to know about legislative changes ahead

by Emma

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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.”


“The changes to the financial aid application process will open doors that were previously closed or seemed inaccessible to some students.”

Helen Faith

Director, Office of Student Financial Aid at the University of Wisconsin-Madison


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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