FAFSA Simplification Act and Changes to the 2024-25 FAFSA

The FAFSA Simplification Act passed on Dec. 27, 2020 as part of the Consolidated Appropriations Act, 2021 and represents a significant overhaul of federal student aid, including the FAFSA form, need analysis, and many policies and procedures for schools that participate in the Title IV programs. 

Federal Student Aid will be implementing the FAFSA Simplification Act alongside the FAFSA portion of the Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE) Act which authorizes a direct data exchange with the Internal Revenue Service (IRS) to make it easier to complete the FAFSA form.

Estimated Family Contribution (EFC) is now the Student Aid Index (SAI)

The EFC and SAI work similarly as each number represents an amount that estimates what families can pay for a student’s education costs, and it considers factors like household income and assets. Additionally, SAI may be a negative number down to -1500.

Families with Multiple Children in College Could Receive Less Aid

The number of children in college will no longer be included in the SAI calculation. Questions will still appear for institutional purposes only.

Pell grants eligibility is tied to how household income and family size compares to poverty guidelines. Families making less than 175% and single parents making less than 225% of the federal poverty guidelines may be eligible for the maximum Pell. Minimum Pell will be guaranteed to students from households below 275%, 325%, 350%, or 400% of the federal poverty guidelines, depending on household structure. All aid is determined by SAI.

What is a Contributor? 

A contributor is considered any individual required to provide a signature and consent on the FAFSA form, including the student, student’s spouse, a biological or adoptive parent, and/or the parent’s spouse (step-parent).

Each contributor will now need to provide their consent to their federal tax information (FTI) being included in the FAFSA.

Who is a Contributing Parent? 

The contributing parent is no longer the custodial parent, but the parent with the greater income and/or assets. The new 2024-25 FAFSA will have a Parent wizard to help students identify who should be added as a contributing parent. Parent is defined as your biological or adoptive parent and/or the parent’s spouse (step-parent).

Consent is Required for Every Contributor

Consent is required to retrieve and disclose FTI. Every contributor is required to consent. If consent is declined, the student’s FAFSA will not be considered for federal student aid, including grants and loans. A consent is still required even if the student and/or parent didn’t file a U.S. federal tax return or any return at all.

The FAFSA will no longer ask for a Save key. However, all contributors must have a FSA ID to complete the FAFSA application. The FSA ID serves as a digital signature on the FAFSA.  A Social Security number is required. Parents who do not have a social security number are also required to submit a FSA ID. Details on this process are coming and will be updated on the Federal Student Aid site.

The IRS Data Retrieval Tool (DRT) is being replaced with Direct Data Exchange (DDX) as the process for transferring federal tax information (FTI) from the IRS to the FAFSA. This will reduce the number of financial questions that most families are usually asked on the FAFSA. In order to use the DDX, all contributors must consent to having their tax information transferred.

This is an increase by 10 schools from the 2023-2024 FAFSA. If there are specific state guidelines when you select a school, the online FAFSA will list them for review in that section.

A contributor is any individual required to provide a signature and consent on the FAFSA form, including the student, student’s spouse, biological or adoptive parent, and/or the parent’s spouse (step-parent).

The IRS will develop the FUTURE Act–Direct Data Exchange (FA-DDX) technology solution, which will establish a secure connection between the IRS and FSA agencies to process requests in near-real time.

Review the What is Direct Data Exchange video on Financial Aid TV.

The IRS Data Retrieval Tool (DRT) electronically transfers Federal Tax Return Information (for students and parents) into your FAFSA form. 

Your Expected Family Contribution (EFC) is an index number used to determine your eligibility for federal student financial aid and is based on the information you provide in your FAFSA form.

Federal Student Aid (FSA) is an office of the U.S. Department of Education.

Federal tax information (FTI) consists of federal tax returns and return information (and information obtained from it).

The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory tax law.

The meaning of parent for FAFSA application purposes is defined as your biological or adoptive parent and/or the parent’s spouse (step-parent).

The Student Aid Index (SAI) is a number that determines each student's eligibility for certain types of federal student aid. This number is calculated with formulas that use information that you provide on your FAFSA form.

Review the Understanding the Student Aid Index video on Financial Aid TV.