ED Releases Summary of Changes for the 2021-22 FAFSA

By Megan Walter, NASFAA Policy & Federal Relations Staff

The Department of Education (ED) released a document last Friday summarizing the changes to the 2021-2022 FAFSA. The most notable changes are the increase of the income threshold for the automatic-zero expected family contribution (EFC) and questions asked about the Schedule 1 tax form. 

For the 2021-22 FAFSA, the income threshold for an automatic-zero EFC was increased by 3.8%, from $26,000 to $27,000. In early June, ED published the federal need analysis methodology for the 2021-22 award year in the Federal Register. Per Section 479(c) of the Higher Education Act (HEA), ED is required to annually adjust the income level necessary to qualify an applicant for the zero expected family contribution. This adjustment is made according to increases in the Consumer Price Index (CPI). 

For applicants who choose to use the IRS Data Retrieval Tool (DRT) when completing their FAFSA, the tool will now automatically answer the FAFSA question, "Did (or will) you file a Schedule 1 with your 2019 tax return?" with a "yes or no" for the applicant. On the 2020-21 FAFSA, after answering the question of whether the applicant filed a Schedule 1 form as a part of their federal tax return, if they answered in the positive they were then given the following question:

"Did you file a Schedule 1 only to report or claim one or more of the following: 

  • Capital gain distributions
  • Unemployment compensation 
  • Educator expenses 
  • IRA deduction 
  • Student loan interest deduction 
  • Alaska Permanent Fund dividends?" 

Due to changes to the 2019 Schedule 1 form, this same question on the 2021-22 FAFSA will no longer include capital gains distributions, as that item was moved from Schedule 1 to the 2019 1040 form, and will be replaced with virtual currency, such as Bitcoin, which is now listed as a reportable item on Schedule 1. 

Due to the changes to the 1040 form and the elimination of the 1040EZ and 1040A forms, taxpayers now file a Schedule 1 to report income or adjustments to income that are no longer listed on the 1040 form. The Schedule 1 filing question is used on the FAFSA to help determine if an applicant or their parent(s) may be eligible to skip certain financial questions on the FAFSA.

 

Publication Date: 8/19/2020


James C | 8/19/2020 11:58:12 AM

This will be a great improvement. So many applicants lose out on a 0 EFC because they answer don't know.

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