Ready, Set, Launch: FAFSA Simplification This Year

FAFSA Simplification, which will be completed for the 2024-2025 award year, affects the application, operations, how data is gathered, software platforms and many other aspects of financial aid administration, all part of the effort to make the FAFSA easier and more accessible.

Major changes have already happened, but more are still to come this year, making 2024-2025 full of updates in determination of eligibility and terminology.

Following is a compilation of changes ahead for this year and a brief recap of what’s been implemented.

By Rick Cox

IMPLEMENTATION IN 2023 FOR 2024-2025:

The FAFSA Form:
The FAFSA Simplification Act changed the application process, which includes the following changes to the form.

• The save key will be eliminated on the updated FAFSA, which will allow an applicant to continue or return to their work without requiring a save after each section of the application.
• The student’s dependency, marital status and tax status will determine if additional contributors are required on the FAFSA. Any contributors will log into studentaid.gov and complete their section of the FAFSA. Consent will need to be captured for all parties required on the form to initiate the retrieval of Federal Tax Information from the IRS.
• Roles will be introduced for the student, spouse, parent and parent’s spouse. The applicable role will dictate the questions to be completed on the FAFSA. The demographic information collected will expand to capture all applicable roles – Full Name, Address, Email Address and Telephone Number. If income information isn't available through the new IRS transfer tool, known as DDX, the applicable roles will have to enter the information on the FAFSA.
• The list of colleges on the application will expand from 10 to 20 entries.
• The new FAFSA is prefilling information already provided to minimize the number of questions that must be answered.
• In 2024-2025, all will need an FSA ID to complete the FAFSA application process. This change will allow someone without a Social Security Number to acquire an FSA ID. This process hasn’t been finalized yet.
• How a student reports household size will change. Siblings or children of an independent student will only be counted in family size if they're living at home. However, for a dependent student, siblings can count if they’re not in the home because of enrollment in college. Our January 31, 2023, blog “A Major Change for the FAFSA” provides details.
• Family size will have minor modifications.
• The FAFSA will ask for the student’s spouse’s name and Social Security Number.
• The parent required to provide financial information on the FAFSA will become the parent who has provided the most financial support to the dependent student, instead of the parent the student lived with more frequently, in case of divorce or separation. If the parent who provided the most financial support remarries, the stepparent’s information will still be collected.
• Homelessness questions will prepopulate with data from previous award years.
• FSA’s goal is to have a draft 2024-2025 FAFSA issued for review by the end of the year.

Questions Eliminated, But Two Added:

• Under the FAFSA Simplification Act, the goal is to not add new questions but to eliminate them, but two will be added for research purposes. The questions request (not require) information on race/ethnicity and gender/identity. The questions will not play a role in the determination of Pell but will be used to determine access, completion rate, loan indebtedness and other factors.

The FAFSA Process:
Federal Tax Information – One of the Biggest Changes:
In a step toward simplification, the FUTURE Act allows data sharing between the Internal Revenue Service and the Department of Education, and income tax data will come directly from the IRS to the Department of Education/FSA beginning in 2024-2025. The data can be used for the FAFSA, income-driven repayment plans, and the Total and Permanent Disability Discharge Program.

Because of the direct transfer, applicants will no longer need to enter income data.

The transfer of Federal Tax Information to the FAFSA will streamline the process, but to protect sensitive data, FSA will watch the process and determine if data needs to be reconciled or updated.

• The FUTURE Act mandates FSA use a data exchange tool called FADDX, known as Future Act Direct Data Exchange, or DDX. The IRS Data Retrieval Tool will be retired in 2024-2025 and replaced with Direct Data Exchange (DDX).
• Federal Tax Information will be collected on the FAFSA, with consent required for the IRS to directly transfer tax income data to FSA. If any party to the FAFSA form doesn’t provide consent, the FAFSA can be submitted, but eligibility will not be calculated.
• Because the data is provided directly by the IRS, it is still considered IRS data instead of FAFSA data. This is covered by more stringent requirements under the IRS code, and the IRS can take action against individuals who inappropriately use or disclose Federal Tax Information.
• Under the FUTURE Act and FAFSA Simplification Act, the IRS Data Retrieval Tool will be retired with the 2024-2025 award year and IRS DRT will be replaced with Direct Data Exchange (DDX).
• An applicant, including the student’s spouse or parents, must authorize their FAFSA information to be disclosed, which would include the discloser of Federal Tax Information to an institution or a state.

Changes, Terminology & Eligibility:

• The Central Processing System will be retired and replaced with a new processing system called the FAFSA Processing System. This will allow FSA to make changes that support aid eligibility and the verification process.
• For 2024-2025, V1, V4 and V5 will be in place. Initially, the Department of Education will conduct random selections. The department will need to collect data and analyze it to establish verification going forward.
• The Student Aid Index (SAI) replaces Expected Family Contribution.
• Other Financial Aid replaces Estimated Financial Assistance.
• SAI replacing EFC on the ISIR will be the number that determines students’ eligibility for certain types of federal student aid. The 2024-2025 ISIR should include the SAI, intermediate values, and a new maximum and minimum Pell indicator. The SAI will range from a -1500 up to a capped 99999. There will no longer be an auto zero EFC or Single Needs Testing Flags. Federal Work Study is required in the determination of the SAI calculation, but it is not a field on the FAFSA application; therefore, earnings for 2022 will need to be entered into COD. Federal Work Study will be available to view in FAA Access and will appear on the ISIR. If the amount of FWS entered into COD has to be updated, then we should expect to see a revised ISIR reflecting the corrected amount.
• The SAI is considered a better representation of the resources a student and/or families can contribute toward education.
• Child support will count in the SAI calculation.
• Family farms and small businesses are no longer excluded.
• The foreign earned income exclusion will now count as untaxed income.
• The SAI can be negative.
• The SAI will compare Adjusted Gross Income to poverty levels to determine Pell eligibility and the SAI.
• Most students will either receive the maximum or minimum Pell. Other students will have their Pell determined by the SAI.
• A student will be able to complete the FAFSA process and receive an SAI without entering parent data. These students would not have a payable SAI until the college verifies that the student meets unusual circumstances, formerly referred to as a Professional Judgment – Dependency Override. At this point, we're not sure how this will be represented on the ISIR, i.e., we don't know if this will be a flag set on the ISIR or a C-Flag that requires resolution.
• The Provisional Independent Student category is new. This is a new status assigned to students unable to provide parent information on the FAFSA. Currently, these are rejected and an EFC is not calculated. Under the new formula, these will not reject and an SAI will be calculated, but the financial aid administrator will need to review to determine appropriate eligibility for aid.
• Colleges cannot have a policy that they will not consider a professional judgment.

IMPLEMENTED IN THE 2023-2024 AWARD YEAR:

• Cost of Attendance.
• Professional Judgment. What was an EFC adjustment is now Special Circumstances, and Dependency Override is now Unusual Circumstances.
• Timing of Determinations of Independence – includes unaccompanied homeless youth or at-risk homeless youth, foster care youth, orphans, wards of the court and students with unusual circumstances.

IMPLEMENTED IN THE 2022-2023 AWARD YEAR:

• Repeal of SULA.
• Removal of Selective Service requirements.
• Removal of drug conviction questions.
• Pell Lifetime Eligibility Used (LEU) – restoration has been expanded to take into consideration closed institutions, Pell Grants falsely certified or loans discharged because of borrower defense.

Rick Cox is Global’s Executive Director of Regulatory Affairs and Compliance