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Published: Dec 22, 2020 9 min read
Money; Getty Images

Students applying for federal financial aid will see a shorter, more straightforward application form in the future.

Simplifying the Free Application for Federal Student Aid (FAFSA) was one of a handful of significant financial aid changes included in the $1.4 trillion coronavirus relief and spending bill Congress passed Monday night. Lawmakers also changed the measure to determine eligibility for Pell Grants, federal aid for low- and moderate-income students, and opened up those grants to incarcerated students.

Together, the new policies could ultimately make it easier for millions of students to access financial aid for college. But many of the changes won’t take effect until the 2023-2024 academic year.

Simplifying the FAFSA

Each year, only 60% of high school seniors fill out the FAFSA, meaning there are many students who could be leaving valuable money to help pay for college on the table. Surveys find that many students don't fill out the form because they don't believe they'll qualify for any aid, but the actual and perceived burden of the FAFSA form also plays a role.

That's why FAFSA simplification has been a goal of advocacy groups and lawmakers from both political parties for several years. Sen. Lamar Alexander, a Republican from Tennessee who’s retiring after this term, said in a statement to Politico that the changes come after nearly seven years of work. He has been a leading driver behind simplifying the form, which he says “will remove the biggest barrier to helping more low-income students pursue higher education.”

The Department of Education had already made a series of improvements to the financial aid form in the past decade, including transferring information directly from the IRS and allowing students to use older tax information to be able to get financial aid information earlier in the application process. But those were piecemeal changes that always fell short of goals for more dramatic simplification efforts, which aim to balance collecting enough information to accurately award financial aid while being simple enough not to turn away prospective students who need help paying for college.

"We've had some victories along the way," says Kim Cook, executive director of the National College Attainment Network, which has pushed for FAFSA simplification. "But this was really the homestretch for us."

The current application has 108 questions on it, but a tiny fraction of applicants need to answer every one of those questions. The simplified version will cut at least 30 questions that apply to less than 1% of applicants, Cook says. While the precise list of questions on the updated application isn't known yet, Alexander has said the number of questions will drop to about 36.

The exact number of questions a student sees in the future will depend on their financial circumstances, according to the National Association of Student Financial Aid Administrators. But in general, the changes mean that the lowest income students will see the fewest number of questions. The bill also allows more students to have federal student aid eligibility calculated without their (or their parents’) assets being taken into consideration. Currently, students have to answer a series of questions about their taxable income before they're allowed to skip questions about assets.

Pell Grant eligibility

The bill also overhauls how the government will determine who is eligible to receive federal Pell Grants. One of the biggest advantages of this change is that it allows for earlier predictability of eligibility — meaning students can have an idea whether they'll qualify without having to fill out the FAFSA.

That will be powerful messaging, Cook says. NCAN's member organizations across the country can tell students in their sophomore or junior year of high school that there is federal aid that could make college a possibility for them, she added.

"This is a real game changer for students and for college affordability in this country."

Currently, students learn of their Pell Grant eligibility only after completing their FAFSA. There's no clear income cutoffs. Instead, it's based on their "expected family contribution" — determined by the questions on the FAFSA — and the cost of attendance at the college they're attending. (The new law also nixes the term "expected family contribution," which neither tells families what they can or will pay for college, and replaces it with the more accurate "student aid index.")

In the future, eligibility will be based on a student's family size and adjusted gross income, as compared to federal poverty levels. For example, a dependent student with married parents will qualify for the maximum Pell Grant at 175% of the federal poverty level, while a dependent student with single parents or an independent student will qualify for the max grant at 225% of the federal poverty level. Using 2020 federal poverty levels, that means a dependent student with married parents and a family size of four would be eligible for the maximum Pell Grant award if their family's AGI was less than $45,850.

The changes don't just help students determine whether they'll qualify for the maximum award; they also set the eligibility for the minimum award in the same way, just using different thresholds. So a dependent student with married parents would qualify for some grant aid if their earnings were less than 275% of the federal poverty level for their family size.

Democratic lawmakers Nancy Pelosi and Chuck Schumer said in a statement that the changes to the Pell Grant formula would increase the number of students eligible for any Pell Grant funding by more than 500,000. The number of students who receive the maximum grant — slated now to increase by $150 to $6,495 next year — will increase by 1.5 million.

Under a separate part of the new legislation tied to pandemic relief, current Pell Grant recipients are also eligible for a new broadband benefit that would provide monthly discounts to households to help subsidize the cost of high-speed Internet.

Other higher education provisions in the bill include reinstating Pell Grant eligibility for incarcerated students after a 26-year ban and forgiving more than $1 billion in loans for more than 40 historically Black colleges and universities.

Finally, the pandemic relief package that passed alongside the spending bill also includes $23 billion in relief aid for colleges. That's $9 billion more than they received from the CARES Act, but it's far less than what colleges groups have said is needed to help to help colleges deal with new expenses and lost revenue brought on my the pandemic.

Still, the financial aid changes bring positive news to admissions and financial aid officers who are facing some alarming trends during the pandemic and recession. New data from the National Student Clearinghouse Research Center show the number of high school graduates who enrolled directly in college fell by roughly 22% this fall. And data from the National College Attainment Network show FAFSA filings for the upcoming school year are down 13.5% compared to this time last year.

This story has been updated to correct the percentage of high school seniors who fill out the FAFSA.

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