More students may be eligible for Pell Grants under FAFSA Simplification Act

Taking effect in July, the FAFSA Simplification Act overhauls the federal student aid process by streamlining the Free Application for Federal Student Aid (FAFSA) form and introducing a new way to calculate student financial need—replacing the Expected Family Contribution (EFC) in 2024-25 academic year with the Student Aid Index (SAI). The new SAI assessment tool promises to make the FAFSA process simpler and more accurate, Forbes reports.

According to the State Higher Education Executive Officers Association (SHEEO), a national association of higher education leaders, these changes will also expand the number of students eligible for Pell Grants and increase the amount of financial aid students from low-income households receive, Diverse Issues in Higher Education reports.

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The current EFC calculates how much a student and their family can contribute to pay for college, and colleges use the output to determine students’ need-based aid. Experts say that, for many students, the new SAI formula will show that they have fewer financial resources to meet college costs, and, therefore, will have less money to contribute and be eligible for more financial aid.

‘The formula is becoming more generous’

SHEEO’s analysis shows that, with the shift to the SAI, over 45% of students in its data set would be expected to contribute $1,000-$2,500 less to their college costs, positioning them for greater need-based aid.

SHEEO also estimates that 43% of the students in its data set who were originally ineligible for Pell Grants would qualify under the SAI. Additionally, the vast majority of Pell-eligible students would see their grant awards increase, some by as much as $8,800. “We see these changes being relatively positive for students,” Dr. Rachel Burns, senior policy analyst at SHEEO, tells Diverse Issues in Higher Education. “The formula is becoming more generous.”

Increased access to Pell Grants may allow more students to afford community college, says MorraLee Keller, senior director of strategic programming at the National College Attainment Network. “If you’re eligible for a full Pell Grant, that will cover, in the majority of the states in the country, your tuition at a local community college,” she explains. “You may be able to go to community college, pay your tuition, have your books, etc. all covered by your Pell Grant.”

SHEEO cautions, however, that for a small share of students—an estimated 8.4%—the SAI could lead to decreased Pell Grant eligibility. Students from families with two or more members in college or whose families have farms or small businesses, for instance, could have a larger expected contribution under SAI, compared with EFC, although experts say that students who currently receive state grants may be grandfathered in so they don’t lose access to aid.

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