Apr 18, 2023
The FAFSA®, or Free Application for Federal Student Aid, is an essential part of applying for financial aid. It’s the first step in accessing federal support like grants, work-study programs, and student loans. The process of filling out the FAFSA has gotten a bad rap over the years, thanks to its length and complexity. The FAFSA Simplification Act, which became law in 2021, is changing that. It’s a phased approach that’s meant to make the FAFSA easier for students and families to understand and complete.
Beginning with the 2024–25 academic year, the EFC will be replaced by something called the Student Aid Index. In many ways, it will serve the same purpose as the EFC, but there are some important things to know about how it works.
The Student Aid Index will be used to determine how much need-based federal aid a student is eligible for. That’s an important detail that will directly affect whether they qualify for grants, work-study programs, Direct Subsidized Loans, and other federal aid for students with significant financial need. The Student Aid Index can also open the door for Direct PLUS loans, which are designed for graduate or professional students, as well as parents of dependent students.
The EFC will soon be phased out altogether. Right now, it functions in much the same way the Student Aid Index will. It reflects how much financial aid you might be eligible to receive from a specific college. The financial information you provide on the FAFSA will determine your EFC. That will also apply to the Student Aid Index.
Financial need is calculated by subtracting the EFC/Student Aid Index from the total Cost of Attendance (COA). The COA includes expenses like tuition, room and board, living expenses, books, fees, and transportation. Once the Student Aid Index takes effect, the calculation will look like this:
There’s a lot of overlap between the Student Aid Index and the EFC. They’re both designed to calculate a student’s financial need and unlock financial aid options. However, the Student Aid Index is different in a few key ways:
The Student Aid Index will replace the EFC beginning with the 2024–25 academic year.
The FAFSA Simplification Act is meant to make the FAFSA less complicated for students and families. It will likely make it easier for students with financial need to get the support they need. For example, the new changes allow financial aid administrators to adjust a student’s financial aid calculation based on special and/or unusual circumstances such as:
Replacing the EFC is another important change, partly because the name is a bit misleading. Even though it’s called an Expected Family Contribution, it doesn’t necessarily reflect a family’s true out-of-pocket college costs. Each school you get accepted to will provide a financial aid award letter that outlines your costs, but there are other expenses to consider—such as student loan interest, entertainment, and other living expenses. These things can significantly increase the total cost of college.
What matters most to students is how the Student Aid Index will affect their financial aid. For many, the process of filling out the FAFSA will likely become faster and easier. Pell Grant eligibility will extend to more students, which could open opportunities for those who previously didn’t qualify. And because the Student Aid Index can be as low as -$1,500, students with extreme financial need may qualify for more federal aid.
No matter what your financial situation looks like, the FAFSA is important when it comes to paying for college. Understanding how the Student Aid Index works can help you approach it with more confidence.
FAFSA® is a registered trademark of the US Department of Education and is not affiliated with Discover® Student Loans.