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Hand Reaching Out To Flying Book. One Of the Books Has A Graduation Cap On It.
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Some families applying for college financial aid this year may qualify for less help than in the past, thanks to a little-known change to the underlying formula.

Families filling out the Free Application for Federal Student Aid (FAFSA) for the upcoming academic year will see the asset protection allowance drop to $0, capping off a years-long trend of shrinking asset allowances that have reduced aid eligibility for middle-income families.

Many college students (and their parents) recognize the FAFSA as an annual rite of passage for qualifying for federal grants and student loans, as well as many college and private scholarships. But few families understand the nuances of how the financial aid formula actually works.

“For most families, it’s a black box,” says Mark Kantrowitz, a national financial aid expert. “They just know it’s harsh, and they think it’s a ridiculous assessment of what they can afford to pay.”

Families have no control over the formula itself. But understanding the basic principles of it can help them determine whether they will qualify for some need-based financial aid or whether they should look for colleges that offer merit aid. That begins with understanding their "expected family contribution," an indicator of need generated by the FAFSA formula.

Despite the disappearance of the asset protection allowance, it’s not all doom and gloom on the formula front: A separate part of the formula — the income protection allowance — has gotten a little more generous. (These behind-the-curtain formula changes are completely separate from the big FAFSA changes now slated for 2024.)