What enrollment leaders need to know about the upcoming FAFSA changes

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What enrollment leaders need to know about the upcoming FAFSA changes

As most of us in enrollment know, the FAFSA is set for some substantial changes in the 2024-2025 academic year. And as any good strategist would tell you, it’s not too early to be thinking about how these changes will impact your prospective students and subsequently, your communication and financial aid strategy. Some analysis and pre-planning will be beneficial to ensure a smooth transition.

While there are several good articles about the specifics of this policy change, this post is focused on how you should think about those changes in relation to your future recruitment efforts.

Upcoming Timeline:

Winter-Spring 2023 – Schools can expect more details to be released by the Department of Education

Spring 2023 – Schools should begin to model the impact of FAFSA changes (e.g., Pell eligibility) on their financial aid strategy

Summer 2023 – Schools should begin to communicate with prospective families about the new FAFSA and any upcoming changes to their financial aid policy

Fall 2023 – The new FAFSA will be available to families in October 2023

Communicate core FAFSA changes to families

At the heart of this policy change is a desire for more students to complete and submit the FAFSA. As it stands, families are often overwhelmed by the process, and many abandon the FAFSA all together.

Beginning in October 2023, the FAFSA will be considerably shorter and rely almost exclusively on information from a family’s recent tax return, if applicable. These changes should make the FAFSA easier to complete, and hopefully, increase the number of filings. But for this to happen, families need to be made aware of these upcoming changes. Collectively, we need to change the perception of FAFSA among students and families by showing them that it will be a more straightforward and less burdensome process to file for aid.

Ideally, these changes will also result in more students submitting their FAFSA to multiple institutions. In EAB’s most recent survey of new college freshmen, 21% of students told us that they only sent their FAFSA to a single school. This is problematic because students are making their college decision without full visibility into their potential aid awards.

In addition to the changes around length and complexity, the new FAFSA will also provide a different method of estimating student aid eligibility. What is currently known as Expected Family Contribution (EFC) will become the Student Aid Index (SAI). In many ways, this will not be a substantial change for families, but it may prevent them from pre-judging their aid award based solely on their FAFSA results.

One other thing to note about SAI is that it will support a negative amount of 1500, whereas the current EFC model only supports a minimum of zero. While this change won’t necessarily provide additional Federal grant dollars to students, it may allow schools to better identify their highest need students. This change may also allow institutions additional leeway in awarding students both grant and loan amounts to cover all possible college-related costs.

Get ready for a Pell Grant expansion

Qualification for Pell Grants will change and should provide broader access and support for low-income students. Eligibility will now be based on family income and household size, allowing for the creation of a lookup table which will give families clarity on their eligibility even before filing the FAFSA. It will also allow for a higher income threshold to consider assets for those receiving means-tested benefits like SNAP, which should expand eligibility in higher-expense states like California and New York.

These changes will most certainly expand the number of students who qualify for Pell. In an early analysis of EAB partners, we are estimating a 20-30 percent increase in Pell recipients, resulting in hundreds of thousands of additional grant dollars for college-bound students. Notably, this change will be made for all enrolled students, not just first-time freshmen, which should have an impact on both recruitment and retention.

EAB estimates a 20% - 30% increase in Pell recipients.

So, what does this mean for your institution? Most importantly, you will want to model these Pell changes early in order to appropriately adjust your new and continuing student aid awards to meet the expanded Pell population. This is particularly true for schools who have automatic awarding criteria (e.g., Promise programs) for students who are Pell eligible.

You may also want to post Pell qualification requirements on your website along with a statement on how you award aid to Pell-eligible students. This communication should begin in the summer of 2023, which will provide students, parents, and college-access counselors better clarity on what to expect without confusing students who are applying for the Fall of 2023.

 

Consider these special circumstances

There are a few other important changes that will be apparent to families and may cause some early questions or anxiety.

The first change is around the SAI when a family has more than one student in college at the same time. (This topic is getting a lot of buzz in pre-college parent social media circles!) In short, the new SAI methodology will no longer take this circumstance into account. Meaning, SAI will be the same for each student regardless of how many family members are in college.

Keep in mind, this does not preclude schools from taking this information into account when awarding institutional aid. For low-income families, this may be less problematic, as other formula changes should mitigate the effects of this shift. But maintaining this consideration for middle- and high-income families may be important as they are likely to see a significantly higher SAI with this new methodology.

An early EAB analysis suggests that if schools choose to divide the new SAI by the number of students a family has in college, it will not dramatically increase the discount rate. If your school decides to go in this direction, it may be wise to let parents know early on that your aid policy will not change in this regard.

The other change that may cause some concern for families is around small business and farm ownership. For the first time in over a decade, families who own a small business or a farm that also serves as their primary residence will have the assets of that business or farm considered in their SAI calculation. The impact of this change will vary widely by location and student population, but in places where farms or small businesses are common, it may be wise to survey students and parents or use other methods to determine the potential impact on your community.

While there are still several unknowns regarding the new FAFSA, it is important for schools to be prepared to coach students and families through these changes. The team here at EAB is already hard at work modeling these changes for our partners and we will continue to share insights as we learn more!

Communicate your value proposition to increasingly price-sensitive families.

This whitepaper lays out nine clear and simple lessons enrollment leaders can follow to increase the persuasive power of their value messaging.

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