How Will Simplified FAFSA Impact Pell Grants? New Report Aims to Answer

Related Topic in the Ref Desk: Pell Grant

By Owen Daugherty, NASFAA Staff Reporter

Major changes are coming to the FAFSA that will significantly impact students’ access to federal Pell Grants.

The changes, as part of the FAFSA Simplification Act, which was passed into law as part of a federal coronavirus relief package in late 2020, will simplify the FAFSA and make it easier for students to access federal financial aid.

In a new report examining how the changes will impact Pell Grant recipients, the Urban Institute found that the share of students receiving the grant will increase slightly from 42% to 45% and the average offer amount will remain unchanged at roughly $3,900.

The report estimates, based on data from 2015–16 and a statistical model created by Urban Institute meant to reflect the changes, that most students will receive roughly the same amount of Pell funding as they would have previously.

Dependent students from families who earn between $38,000–$75,000 and $75,000–$125,000 will see the greatest changes in their Pell amounts, according to the report, with 17% of students in the first income group seeing an increase of at least $500 and another 12% receiving Pell who otherwise would not have. For students from families in the $75,000–$125,000 range, 7% will have their Pell Grant reduced by $500 or more and 8% of students who previously would not have received a Pell Grant will be eligible following the changes.

Additionally, about 12% of independent students without children will receive increased Pell amounts, relative to what they would have received under the previous formula.

A major change made to the FAFSA as part of the simplification act is that many students from low-income families will now automatically qualify for the maximum grant, meaning they will have a better idea of how much aid they will receive even before they complete their FAFSA .

Importantly, the report’s estimates indicate that the automatic maximum that will come with the simplified FAFSA will reach most low-income students.

Among students who will receive the maximum Pell Grant under the new FAFSA formula, about 5 of 6 will receive it automatically based on their family’s income and household size.

“This means high schools, education nonprofits, and others can reach out to low-income families and give them a clearer sense of the aid they would receive,” the report noted. 

The changes to the financial aid form will be implemented in a phased approach, with the full transition set to be complete by the 2024-25 aid year. 

In an announcement earlier this year, the Department of Education said it would implement the removal of the drug conviction and Selective Service registration eligibility criteria early for the upcoming 2021-22 aid year, with the rest of the changes set to be completed by aid year 2024-25, a year later than the statutory deadline for the changes due to ensure for enough time to smoothly implement the overhaul. 

All told, the report predicts the changes will have a long overdue positive impact and make completing the FAFSA easier for students and open the Pell Grant to more. 

Overall, 76% of Pell Grant recipients will receive the maximum amount, 16% will receive the minimum, and 8% will receive an amount in between, the report estimates.

Under the current formula, 60% of Pell recipients get the maximum amount. The increase in recipients receiving the maximum led the Urban Institute to conclude that the impact lawmakers are hoping for under a revised and simplified FAFSA will likely come to fruition.

The report noted that once the changes to the FAFSA are fully implemented, most students will get a similar award to what they receive now without having to answer as many questions on the FAFSA. Further, most students who are eligible for the maximum award will be able to know before they even begin filling out the FAFSA.

“This modeling shows that the FAFSA Simplification Act, when implemented, will work as advertised: it better targets Pell dollars to low-income families, allows for early awareness of potential Pell eligibility, and simplifies the application process for all aid applicants,” said NASFAA’s director of policy analysis Karen McCarthy.


Publication Date: 8/10/2021

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