A new brief from the State Higher Education Executive Officers Association (SHEEO) found that while FAFSA simplification will be beneficial to most students and expand access to federal financial aid, state aid and grant programs may face challenges.
With the new FAFSA for 2024-25 coming in December, SHEEO analyzed national and state data to explore the “unintended consequences” of the FAFSA Simplification Act, comparing changes with the new Student Aid Index (SAI) and Expected Family Contribution (EFC), and with federal Pell Grant eligibility.
The main goals of the study, according to SHEEO, were to assist state higher education agencies in predicting how federal and state financial aid eligibility will change nationally and in their state, and to identify challenges or negative impacts associated with FAFSA simplification.
SHEEO noted that while there have been some analyses of the impact of FAFSA simplification, “little predictive modeling has been done to anticipate how FAFSA simplification will affect specific states, sectors, and subpopulations of students, both in regard to Pell Grant eligibility/awards and state grant eligibility/awards.”
For this brief, SHEEO used data from the 2017-18 National Postsecondary Student Aid Study and Institution Student Record Information (ISIR) data provided from Kentucky, Missouri, Nebraska, New Jersey, and North Carolina.
Overall, looking at changes in SAI to EFC at the national level for dependent students, 17.7% of students are expected to experience an increase from EFC to SAI, 74.1% are expected to experience a decrease, and 8.2% are expected to have an SAI equal to EFC.
Specifically, SHEEO found that 31.4% of dependent students have an EFC of $0 compared to 50.8% of students who are estimated to have an SAI less than or equal to $0. And 23.5% of dependent students have an EFC greater than $15,000, while 24.1% are estimated to have an SAI greater than $15,000.
Additionally, SHEEO noted that a large percentage of low-EFC students are anticipated with FAFSA simplification to have a decrease in SAI relative to EFC to a value below $0, including 73.2% of students with $0 EFC, 55.6% of students with $1-$1,000 EFC, and 48.3% of students with $1,001-$3,000 EFC.
Looking at independent students, the majority (77.4%) are anticipated to have a decrease in SAI relative to EFC, with just 2.9% expected to have an increase. Specifically, 61.1% of independent students have a $0 EFC, while 53.8% of students are estimated to have an SAI less than $0. And 22.6% of independent students are anticipated to have an SAI of $0, given that the federal methodology does not have an automatic-zero SAI flag for independent students without dependents, SHEEO noted.
As for how FAFSA simplification will impact federal Pell Grant eligibility, SHEEO found that most dependent students, 62.8%, are expected to experience no change in their Pell Grant award and 35.2% are anticipated to see an increase in their Pell Grant award.
However, 1.1% of dependent students, or 49,700 students, who were eligible for the Pell Grant under the current formula are anticipated to lose Pell eligibility. And 6.8%, or 154,470 dependent students, are expected to gain Pell eligibility. Overall, SHEEO estimates that nearly 220,000 students would gain Pell eligibility in 2023-24, with total Pell Grant awards expected to increase by approximately $7.85 billion in 2023-24.
SHEEO noted that independent students have high rates of receipt of Pell Grants under the current formula. Under FAFSA simplification, 69.2% of independent students are expected to experience no change in their Pell Grant award, meanwhile 30.2% are anticipated to experience an increase.
With changes to how federal financial aid is calculated, SHEEO cautioned that state grant programs will need to adjust how they calculate and distribute aid. State grant programs that could be affected include first-dollar programs, last-dollar programs, programs that use EFC or SAI in the aid formula, and programs that award grants based on Pell eligibility.
For example, many state grant programs use a student’s calculated EFC to estimate the amount of state grant dollars a student is eligible to receive. SHEEO noted that state grant programs will need to recalculate how to distribute aid, especially for students with negative SAI values.
Additionally, with more students eligible for the federal Pell Grant, SHEEO noted that state grant programs that use Pell eligibility could become crowded. SHEEO wrote state grant programs should consider “how closely state grant eligibility is tied to Pell and make adjustments to the level of grant award for each level of Pell award.”
“The results of this research at the national level suggest that many students will have lower expected out-of-pocket costs for postsecondary education as indicated by the lower SAI values relative to EFC,” SHEEO wrote. “While the ultimate balance of financial assistance is uncertain and unique to each state’s circumstances and the grant programs available to students, this research quantifies the estimated impact for students at the national and state level.
And while most students will see expanded financial aid access, some won’t. There are concerns that students with more than one family member in college may experience increases in SAI compared to EFC, and may have decreases in Pell eligibility and award amounts. Students in this situation make up some of the 56,600 students that are anticipated to lose Pell eligibility.
SHEEO highlighted NASFAA’s own article in its brief, which found that removing the consideration of the number of family members in college will “yield a more equitable process,” despite the fact that some families will lose federal Pell Grant eligibility after this change.
Additionally, students with family farms and small businesses may have higher SAI values after the family farm exclusion is eliminated. SHEEO cautioned that it may have underestimated the potential negative impacts of simplification since it can’t model this change.
“The simplification of the FAFSA form is primarily beneficial to students: Not only will students have fewer questions to complete on the FAFSA, but they will likely be eligible for more federal financial aid,” SHEEO wrote. “While most students will see expanded eligibility and award levels, some uncertainties remain.”
Publication Date: 10/30/2023