This year’s FAFSA overhaul will be unveiled when the new form is released this December. Among the changes are a shortened form and expanded Pell Grant eligibility for households with financial need. However, my biggest three takeaways are to multiple child households, divorced households, and the treatment of grandparent 529 accounts:
Families with two kids in school at the same time:
Previously: a family’s expected family contribution (EFC) is divided by the number of children in school at the same time.
- Example: EFC of $60,000. Two children in school at the same time = Each student’s EFC is $30,000
Now: The EFC is being replaced by the Student Aid Index (SAI) which is not discounted for multiple children in school at the same time.
- Example: SAI of $60,000. Two children in school at the same time = Each student’s SAI is $60,000.
Result: Potentially less need based financial aid for multiple child households.
Previously: The custodial parent’s financials were used in calculating a student’s EFC on the FAFSA. Custodian was defined as the parent whom the student lives with more than 50% of the time.
Now: The parent who provides the most financial support is now defined as the custodian parent, even if the child lives with this parent less often
Result: Potentially less need based financial aid for divorced families where the parent that the child lives with most has lower earnings.
Previously: Distributions from grandparent 529 accounts were treated as untaxed income to the student having a negative impact on potential need based financial aid.
Now: These distributions will not have an impact on need based financial aid as these payments are not reported on the new FAFSA.
Result: This change makes grandparent 529 accounts an even more attractive college savings tool.
The changes to this year’s FAFSA open the door to more college planning strategies. Have questions about how these adjustments will impact your college plan? Click here to schedule a call to discuss.
All the best,
Andrew Holmes, Certified College Planning Specialist™
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