The Education Department has failed to update guidelines used to calculate eligibility for financial aid – an error that could result in students receiving less scholarship and grant money for college next school year.
The mistake is the latest hiccup in the agency’s implementation of a three-year-old bipartisan law to simplify and ease requirements for the Free Application for Federal Student Aid. The redesign of the form, which is critical for students seeking federal, state and institutional aid, has been beset by delays that the department blames on the complexity of the changes required. Advocates and lawmakers have been sympathetic but are frustrated with the execution of the law.
The initial version of the simplified FAFSA, which covers aid for the 2024-2025 school year, is expected to be released by Dec. 31.
Among the many changes to the FAFSA is an increase in the amount of income shielded from the formula that determines how much students have to pay and the aid they can receive. Congress directed the department to raise the amount of income protected by 20% for parents, 35% for dependent students and almost 60% for students with children of their own, and to adjust the numbers for inflation annually.
However, the department neglected to make the adjustment, which was supposed to be calculated using the consumer price index from April 2020 to April 2023 – a period of record-high inflation.
College access and aid groups flagged the outdated information in a series of comment letters in October about the new FAFSA and implored the department to update the information, to no avail.
The Education Department said Thursday it is using the tables that appear in the law because of timing and data constraints but will make updates for the 2025-2026 aid cycle.
The advocate groups said that if the tables are left unchanged, many students will get less financial aid than they are actually eligible to receive. That is because the current tables will produce an artificially high Student Aid Index, or SAI – a figure used to determine a student’s ability to pay for college and a replacement for the Expected Family Contribution. The higher the SAI, the lower the aid eligibility.
“We’re going to see lower federal, state, and institutional aid across the board because the formula isn’t going to keep up with the inflationary impact on income and costs over time,” said Bryce McKibben, the senior director of policy and advocacy at the Hope Center at Temple University.
McKibben helped write the FAFSA Simplification Act in 2020 while working for Sen. Patty Murray, D-Wash., when she chaired the Senate Education Committee. He said neglecting the three years of inflation adjustment – when cumulative inflation hovered above 18% – means far more of a family’s earnings will factor into the new formula than Congress intended.
By his estimations, dependent students and their families will see anywhere from $6,000 to more than $10,000 of additional income considered in their calculation, depending on the size of their families. A single parent enrolled in college with one child, he said, will have more than $8,000 of income factored in when it should not be considered.
The Education Department said the tables have no bearing on the lowest-income students receiving Pell Grants, a form of aid for undergraduate students with exceptional financial need. The new law ensures that families earning less than 175% and student parents earning less than 225% of the federal poverty line will automatically qualify for the maximum Pell Grant – $7,395 for the current academic year.
The Education Department projects that 1.5 million more students will receive the maximum award because of the new law, bringing the total number of students eligible for the full amount to more than 5.2 million.
But students in the running for partial Pell Grants will not fare as well, said Jill Desjean, a senior policy analyst at the National Association of Student Financial Aid Administrators. Students who do not qualify for Pell Grants solely on the basis of income may become eligible once the Student Aid Index has been applied, which makes income protection tables especially important for them, Desjean said.
The State Higher Education Executive Officers Association has projected that approximately 2.1 million students previously ineligible for Pell could become recipients under the new law. But those projections are imperiled in this upcoming FAFSA cycle.
“Without this inflation adjustment … students could either get a lower Pell Grant than they should qualify for or might get knocked out of Pell Grant eligibility,” Desjean said.
But the impact does not end there. The index also determines eligibility for other forms of need-based federal aid, such as work-study and subsidized loans – in which the government pays accruing interest while students are in school, Desjean said. States and colleges will also use the metric in awarding scholarships and grants.
The Education Department says it is “helping colleges interpret the SAI” as they make their own decisions on financial aid.
Rep. Bobby Scott of Virginia, the top Democrat on the House education committee, expressed frustration with the department’s failure to increase the income protection allowance and said the agency must find a way to it make up to families.
“The Department could adjust next year’s allowance to account for any missed inflation adjustments since 2020. … I will continue to use my oversight authority to ensure the department simplifies the FAFSA process and helps every American get the resources they need to access a high-quality education,” Scott said.
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