Unlocking the College Financial Aid Vault – More Difficult Than Ever

Unlocking the College Financial Aid Vault – More Difficult Than Ever

The 2024-25 Free Application for Federal Student Aid (FAFSA) is the revamped version purportedly designed to streamline the process and make life easier for FAFSA applicants.

Really? A closer look reveals potential concerns that merit careful consideration.

Let’s delve into some critical changes in FAFSA that require your attention and understanding.

The FAFSA application was only made accessible through a limited “soft launch” on December 31, 2023. In previous years, the FAFSA would have been accessible as early as October 1, 2023, allowing families to submit their applications early. This early availability traditionally facilitated colleges receiving aid information early, enabling families to receive financial aid offers early. Consequently, families could engage in a competitive review of various offers, leading to well-informed decisions. Not this year! The altered timeline for the FAFSA application in the current year has disrupted this established process.

College Financial aid staff will not receive families’ FAFSA information until mid-March. This delay implies that financial aid offers, which typically would have been distributed in January in previous years, are now expected to be delayed until mid-April.

To navigate the financial aid process effectively, it is crucial to assume full ownership of the process. As the captain of your ship, don’t presume smooth sailing ahead. Take charge by ensuring that you follow up on every detail. Foster collaboration with all the colleges you’ve applied to and proactively visit the financial aid office to check that all the t’s are crossed and the I’s are dotted. Run, don’t walk!

In prior years, only the student and one parent were required to possess a Federal Student Aid ID (FSA ID). However, for the 2024-25 form, anyone providing information, including the student’s spouse, biological or adoptive parent, or the parent’s spouse, must also obtain an individual FSA ID. Creating an FSA ID requires “contributors” to furnish their Social Security Numbers and email addresses – or nothing moves forward. Students should acquire their FSA ID first before all other “contributors”.

The revised FAFSA permits students to submit their application to a maximum of 20 schools.

Sibling Discount Rescinded! 

In contrast to the previous FAFSA formula, which factored in multiple children concurrently attending college, the new formula does not. Consequently, families with multiple students in college will no longer receive any financial benefits. It’s essential to appeal the sibling discount removal at the college chosen to attend, particularly if your children are enrolled in colleges with substantial endowments. These institutions might decide to compensate for the loss of funding using their discretionary funds. Historically, if your Expected Family Contribution (EFC), now called the Student Aid Index (SAI), was $20,000, the amount was split between the two children. Now, it will be $20,000 per child. This is the opportune time to appeal for additional funds as soon as possible!

Farmers and Small Business Owner Changes 

Families with an Adjusted Gross Income (AGI) of $60,000 or more operating small businesses with 100 or fewer employees will experience a change. This new FAFSA legislation will also impact families owning farms with an AGI over $60,000. Under the new rules, the business and the farm will now be regarded as financial assets eligible to contribute to college expenses. In the past, this did not apply. However, families with an income of $59,999 or less are exempt from reporting any assets, including the valuation of a small business or a family farm.

Custodial Parent Changes

In cases of parental divorce or separation, the FAFSA completion responsibility now falls on the parent who provides the highest financial support. This marks a departure from the previous requirement, where the custodial parent, defined as the one with whom the child primarily resides in the year leading up to FAFSA filing, was obligated to complete the form. This adjustment will likely prompt delicate discussions and necessitate a thorough financial review, accompanied by the submission of relevant documentation.

And now, some good news!

Commencing the 2023-24 academic year, students are no longer required to disclose cash support from grandparents or extended family when completing the FAFSA application. Grandparents holding 529 accounts for their grandchildren can utilize these funds for college tuition without adversely affecting their grandchildren’s eligibility for financial aid.

This modification stems from the stimulus bill passed at the close of 2020. Previously, FAFSA considered contributions from grandparents as untaxed income to the grandchild, subjecting them to a 50 percent assessment—significantly higher than the 5.65 percent rate applied to a parent’s contributions.

For instance, a $20,000 contribution from a grandparent could reduce a student’s financial aid by $10,000. Consequently, many grandparents postponed their distributions until the student’s junior year of college to avoid these contributions affecting the FAFSA. With this alteration, such strategic delays are no longer necessary.

Final Thoughts About the 2024-25 FAFSA

Given the anticipated increase in appeals this year, it is crucial to communicate with the financial aid office as early as possible after receiving your offer letter if you think you have the need to appeal. Reach out to the office directly and collaborate with a designated financial aid counselor. Remember, it’s up to you to take full responsibility for the entire process and adopt an assertive, not aggressive, approach.

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