Q&A on Changes to Federal Student Aid Policy Included in Consolidated Appropriations Act, 2021
The following questions and answers were developed to help those who may not have in-depth knowledge of student aid better understand the changes to federal student aid policy contained in the Consolidated Appropriations Act, 2021.
How do these simplification measures make things easier for students and parents?
- The bill reduces the number of questions on the FAFSA (can't point to a specific number reduced, as it varies based on family financial strength).
- The bill ensures that our lowest income families have the fewest questions to answer, and therefore, the most simple, easy experience in completing the application.
- The bill creates predictability for Pell Grant eligibility for the lowest income students (those eligible for the maximum annual Pell award) by using the number of parents in the household, and family income as a percentage of the federal poverty level for the applicant's household size.
- Using 2020 federal poverty levels, a dependent student with a single parent and a family size of two would be eligible for the maximum Pell Grant award if their family's AGI was < $38,790.
- A single independent student would be eligible for the maximum Pell Grant award if their AGI was < $22,330.
- The bill allows more students to have federal student aid eligibility calculated without their assets (or their parents', for dependent students) being taken into consideration, if they:
- Are a non-tax-filer.
- Qualify automatically for the maximum Pell Grant award.
- Have an AGI of < $60,000 and filed a simple tax return with no lettered schedules A-H, or with only a Schedule C that shows less than a $10,000 gain or loss.
- Are a recipient of a means-tested benefit.
- The bill eliminates the suspension of federal student aid eligibility for applicants with drug-related convictions, removes the Selective Service registration eligibility requirement, and removes questions about both from the FAFSA.
What is the main difference between what students experience today when filling out the form and what it will be like after this change?
- Overall, students will be presented with fewer questions on the FAFSA, as the bill:
- Works in concert with the Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE) Act, which imports all data related to taxable and untaxed income directly from a student or family's tax return into their FAFSA, which means families will no longer have to self-report income items on the FAFSA.
- Allows more students to have their eligibility calculated without consideration of their assets.
- Currently, to be granted permission to fill out a no-asset FAFSA, students must first answer a confusing series of questions about their taxable income. Now, the filtering will be based on the tax return information that comes directly from the IRS, thus reducing the numbers of questions students and families must answer as well as their chances of making mistakes.
- Students will no longer be asked whether they have had drug-related convictions or whether they are registered with the Selective Service System.
- Applicants are currently presented with an Expected Family Contribution (EFC) upon completion of the FAFSA. The term is confusing because it doesn't reflect what this figure really is — an eligibility index for federal student aid. Going forward, in an effort to reduce misinterpretation, applicants will instead be presented with a Student Aid Index (SAI).
What is the difference between the Student Aid Index (SAI) and Expected Family Contribution (EFC)?
While the bill makes some changes to the calculation, the SAI is largely just a new name for EFC, in an acknowledgment that the term doesn't properly characterize what is, in fact, an eligibility index for distributing funds, and not a reflection of what a family can or will pay for postsecondary expenses. The SAI would determine eligibility for all types of Title IV student aid except the maximum and minimum Pell Grant awards, which would be based instead on dependency status, the number of parents in the household and family income as a percentage of the poverty level. Pell Grant awards in the middle ranges of eligibility would be determined using the SAI.
What does the negative SAI do?
The negative SAI establishes a framework to allow the very neediest students to receive aid in excess of the Cost of Attendance (COA) established by their school. Even absent additional federal aid for students with negative SAIs, the negative figure could prove helpful by further differentiating the neediest students, whose EFCs are currently all clustered at zero because this is the lowest the EFC can go. This could allow states and institutions to more accurately target need-based aid, including the Federal Supplemental Educational Opportunity Grant (FSEOG).
Why was this a good time to enact such change?
- There has long been a need for FAFSA simplification, as well as many of the other changes this bill will deliver, but as higher education's students and institutions are facing the financial impact of the pandemic, the need for reform has never been greater. Simplifying the aid application process and expanding Pell Grant eligibility will play a critical role in expanding college access despite the pandemic's economic impact.
- As we move into a new Congress and presidential administration, prospects for comprehensive Higher Education Act (HEA) reauthorization are unclear. With both Congress and the Biden administration likely to spend much of the first half of 2021 focusing on pandemic relief, this is a critical window to deliver these much-needed improvements to students. When the time is right for comprehensive reauthorization, the changes enacted in this bill will serve as a foundation for additional student aid reform.
- As ED works to implement the FUTURE Act, this bill delivers timely changes that will work in tandem with the FUTURE Act's data-sharing provisions to more fully realize the goal of FAFSA simplification. The FUTURE Act provided a critical first step for FAFSA simplification but was always intended to be a starting point to be followed by a more comprehensive bill that would further reduce the number of FAFSA questions, particularly for our country's neediest students.
Was there anything else in the bill that will be helpful to students and families?
- Repeals the limitation on lifetime subsidized loan eligibility which currently bars students from receiving subsidized Direct loans for more than 150% of the published length of their program.
- Offers relief to recipients of the Historically Black Colleges and Universities Capital Financing Program, forgiving just over $2 billion in outstanding loans held by 45 colleges and universities.
- Restores Pell Grant eligibility for students who were unable to complete their program of study due to the institution closing, were falsely certified as eligible to receive federal financial aid, or whose loans were discharged in a successful borrower defense claim.
Publication Date: 12/23/2020