This letter summarizes changes to requirements under Title IV of the Higher Education Act resulting from the FAFSA Simplification Act that will become effective for the 2024-25 Award Year. These changes include significant modifications to the need analysis formulas and calculation of Federal Pell Grant awards.
The FAFSA Simplification Act (Act) was enacted into law as part of the Consolidated Appropriations Act, 2021, and amended by the Consolidated Appropriations Act, 2022. The Act further amends the Higher Education Act of 1965, as amended (HEA), and impacts the Free Application for Federal Student Aid (FAFSA ® ).
Over the past three years, the Department of Education (Department or we) has implemented these changes in phases, beginning with the 2021-22 Award Year. The final phase of the Department’s implementation of the changes required by the Act will occur in the 2024-25 Award Year.
This Dear Colleague Letter (DCL) summarizes the changes resulting from the Act that have previously been implemented and explains the final changes to the need analysis formulas and the calculation of Pell Grant awards that the Department is implementing beginning with the 2024-25 Award Year. The Department will make significant and extensive changes to the FAFSA form and process for the 2024-25 Award Year to implement these statutory changes.
The Office of Postsecondary Education (OPE) has also published Questions and Answers (Q&As) about FAFSA Simplification changes for the 2024-25 Award Year. These Q&As can be found on the OPE website.
The Department has already implemented numerous components of the Act in the current and prior award years. Major changes that have already been implemented include:
Beginning with the 2021-22 Award Year, elimination of limitations on student eligibility related to Selective Service registration and drug convictions, described in DCL GEN-21-04
Beginning with the 2021-22 Award Year, elimination of the subsidized usage limitations on eligibility for Direct Loans, described in Electronic Announcement EA ID: DL-21-04
Beginning with the 2023-24 Award Year, changes to the statutory definition of cost of attendance (COA), professional judgment requirements, determinations of independence, application process for unaccompanied homeless youth and foster care youth, and Pell Grant lifetime eligibility restoration described in DCL GEN-22-15
Beginning with the 2023-24 Award Year, elimination of the ban on Pell Grant eligibility for confined or incarcerated individuals, described in DCL GEN-23-05
The Act requires that schools transition from the Expected Family Contribution (EFC) to the Student Aid Index (SAI) beginning in the 2024-25 Award Year. The SAI is a number that determines each student’s eligibility for certain types of federal student aid. An applicant’s SAI is calculated using modified need analysis formulas outlined in the Act. These formulas use information that applicants provide on the FAFSA® form and, in most cases, federal tax information (FTI) that is retrieved directly from the Internal Revenue Service (IRS).
The most significant changes to the need analysis formulas include:
Removal of the number of family members in college from the eligibility calculation The possibility for an SAI to be a negative number, with a minimum SAI of -1,500 instead of zero Elimination of alternate EFCs for enrollment for a period other than 9 monthsElimination of the Simplified Needs Test (SNT) and Auto-Zero calculations, which have been replaced with similar calculations described below
The Act requires that, wherever possible, the Department use data received directly from the IRS to calculate a student’s SAI and Pell Grant award. The Fostering Undergraduate Talent by Unlocking Resources for Education Act (FUTURE Act) requires the Department of Education to access tax information held by the IRS pertaining to FAFSA applicants—and, where applicable, their parents and spouses—through a secure method: the FUTURE Act Direct Data Exchange (FA-DDX). The FUTURE Act amended the Internal Revenue Code (IRC) to mandate the disclosure of FTI directly from the IRS to the Department with an individual’s approval and consent. The FUTURE Act also made providing consent for the exchange of FTI a requirement for receiving federal student aid.
There are strict limitations on the access and use of FTI under the IRC. FTI will only be available to institutions, state higher education agencies, and designated scholarship organizations, via the Institutional Student Information Record (ISIR). FTI will not be included on the FAFSA Submission Summary.
Applicants may view all information provided on their FAFSA by obtaining an unredacted copy of their ISIR from their school. However, contributors may only obtain information they provided on the FAFSA, such as their FTI. Contributors are individuals, such as a parent or spouse, that may be required to provide information on an applicant’s FAFSA depending on the applicant’s dependency or marital status. Despite these limitations, institutions are still permitted to use professional judgment to amend FAFSA data values, including information that was originally received as FTI.
Applicants and other contributors must consent to the use of their FTI on the FAFSA. An applicant or contributor can enter income and tax data manually on the FAFSA. However, we will reject the ISIR, and the applicant will not be eligible for federal student aid until all required contributors provide consent. Because the FUTURE Act requires consent to use FTI for federal student aid eligibility and FTI includes filing status, nontax filers must also consent.
Applicants and other FAFSA contributors will also need to provide information on the FAFSA that is not FTI (such as certain demographic information and assets). That information is subject to general requirements for use and disclosure of FAFSA data.
An Electronic Announcement (EA ID: GENERAL-23-34), published May 12, 2023, contains additional information on the requirements for accessing and using FTI. The Department also plans to provide additional information about requirements for protecting Controlled Unclassified Information, including FTI, in the near future.