The FAFSA Simplification Act Opens a Policy Window to Improve State Student Aid Programs

By Rachel Burns and Pearson Brown

The Free Application for Federal Student Aid (FAFSA) Simplification Act implements the most significant changes to the federal financial aid process since the early amendments to the Higher Education Act of 1965. Numerous organizations in the college access and success field have advocated for many years to simplify the FAFSA’s burdensome completion process. The Department of Education will launch a new version of the FAFSA for the 2024–25 award year in December 2023. Advocates are broadly celebrating changes the FAFSA Simplification Act brings as these modifications should increase the number of students eligible for federal aid programs and make the application process simpler and more predictable for students and their families.

Major amendments to the FAFSA include:

· Changing the need analysis formula from expected family contribution (EFC) to student aid index (SAI).

· Adjusting the AGI threshold for automatic maximum Pell eligibility to 175% or 225% of the federal poverty guidelines, depending on student dependency status and marital status.

· Allowing for negative SAI as low as -$1,500.

· Reducing the Pell Grant in proportion to a student’s actual enrollment rate, if enrolled less than full time.

· Widening student access to financial aid by eliminating prohibitions for students with drug-related offenses and male students who failed to register for Selective Service.

· Expanding maximum Pell Grant eligibility based on income, tax filing status, and national poverty guidelines.

At the state level, need-based financial aid programs are often connected to the federal financial aid process because they rely on information from the FAFSA and model their eligibility criteria on Pell Grant eligibility. Changing or eliminating questions on the FAFSA can affect state financial aid programs, policies, and award levels. According to data from the National Association of State Student Grant and Aid Programs (NASSGAP) survey, roughly three-quarters of state grant money awarded in 2020–21 was need based. Need-based aid programs are key to state strategies to close equity gaps, as aid is targeted toward students from low socioeconomic status backgrounds who may not enroll in higher education without state financial support. Empirical studies have confirmed that state need-based aid programs have a positive impact on student enrollment, persistence, and completion.

Any disruption to state need-based aid awards or added complexity to the aid application process, as a result of changes implemented at the federal level under the FAFSA Simplification Act, could have detrimental effects on low-income, first generation, students of color, and other underrepresented populations that states aim to reach through need-based aid programs. Structural racism and administrative burdens have hindered access to financial aid, and the FAFSA Simplification Act will make obtaining need-based aid more equitable. States will need to be prepared for the new FAFSA to ensure that their financial aid programs continue to promote student access and avoid hurdles that could arise from not anticipating the FAFSA Simplification Act’s implementation.

FAFSA simplification also presents a policy window for states to revisit and update their financial aid programs. As state agencies strive to advance their higher education goals, agency officials navigate a myriad of competing issues and priorities to address state needs. With wide-ranging potential initiatives to consider, those who wish to see impactful policies come to fruition must identify an opportune time to advocate for their vision. Policy windows are often unanticipated and brief, and the FASFA Simplification Act entails a window of opportunity for state agencies to advance policies that can increase higher education access and position more students to receive state aid.

With the impending changes to FAFSA data elements, definitions, eligibility criteria, and deadlines (at least for the 2024–25 award year) some states will need to consider regulatory and statutory changes to their aid programs. While this could be accomplished through simple amendments to language, states have a rare opportunity to reevaluate and reconsider financial aid programs on a broad scale. For instance, states can implement reforms to current processes to eliminate administrative burdens that have perpetuated structural barriers to higher education for various student populations. States can also assess the extent to which their aid programs are assisting students with the most financial need, ensuring that financial aid programs are equity driven and target low-income students.

With generous funding from the Bill & Melinda Gates Foundation, the Joyce Foundation, and the Kresge Foundation, SHEEO has partnered with NASSGAP to coordinate a learning community of states working together to share ideas, challenges, concerns, and solutions related to the new FAFSA. Learning community members continue todiscuss the potential impacts on state financial aid programs, consider policy reforms to improve programs and processes, and engage in intensive work to develop and share solutions to common challenges.

The learning community’s four primary goals include:

· Increasing awareness of the FAFSA Simplification Act and the potential impacts for states by expanding outreach to all states and fostering communication between states and Federal Student Aid.

· Providing states with the information, assistance, and guidance they need to adapt financial aid programs to the new FAFSA.

· Ensuring that students with financial need are not deprived of state financial aid awards because of changes to the FAFSA.

· Encouraging states to take advantage of a policy window to implement equity-driven improvements to their financial aid policies and processes.

SHEEO will compile knowledge gained from the learning community into a final report that ties together common themes, identifies actions and strategies that were successful, and offers guidance on remaining issues that may arise during implementation. This report will serve as a mechanism for extending the impact of the learning community to all states and providing recommendations to states that are reconsidering their financial aid programs. We anticipate that the learning community’s experience will guide policy decisions moving forward as the country welcomes a new FAFSA.

Learn more about FAFSA Simplification at https://sheeo.org/project/fafsa-simplification/.