Pandemic relief bill simplifies FAFSA, broadens access to financial aid

The omnibus spending and stimulus package passed by Congress on December 21 not only provides another round of dedicated funding for higher education institutions but also includes significant changes for student financial aid—shortening the Free Application for Federal Student Aid (FAFSA), allowing incarcerated students to access Pell grants, and replacing the clumsily named “expected family contribution” calculation with a new “student aid index.” 

The financial aid changes are “a big achievement for the college-access field, and something that will have very real benefits for many students,” Carrie Warick, director of policy and advocacy for the National College Attainment Network, told The Chronicle of Higher Education.

President Trump signed the Consolidated Appropriations Act of 2021—a $1.4 trillion omnibus spending bill and $900 billion coronavirus relief package—in the final days of 2020. The stimulus includes nearly $23 billion for colleges and universities via the Higher Education Emergency Relief Fund, an increase of $8 billion over the aid provided for colleges and universities in the Coronavirus Aid, Relief and Economic Security (CARES) Act approved in March 2020, which allotted $14 billion for colleges. 

Funding formula seeks to address equity concerns

Much like the CARES Act, the new legislation stipulates that half of the institutional aid funds likely will need to be distributed to students as emergency financial aid, according to EAB. Unlike the CARES Act, however, the new legislation revamps the funding formula to account for part-time students in its calculations—a change that will route more relief funds to community colleges and regional public institutions, which tend to enroll more part-time students. “In other words,” EAB writes, “Congress is attempting to correct for some of the equity concerns inherent in its CARES Act allocation formula.”

The bill also includes an additional $1.7 billion specifically for minority-serving institutions and historically Black colleges and universities (HBCUs) and forgives more than $1.3 billion in federal loans to HBCUs for capital improvement projects. However, many higher education groups like the American Council of Education (ACE) called the latest relief package “wholly inadequate.” 

“The money provided in this bill will provide some limited relief, which is welcome news to struggling students and institutions,” ACE President Ted Mitchell wrote in a statement. “But it is not going to be nearly enough in the long run or even the medium term. The financial impact of the pandemic and its economic fallout will be enormous, with more than half a million job losses on campuses already.” 

Package brings long-awaited FAFSA improvements

Meanwhile, higher education advocates did celebrate several financial aid-related changes included in the package. As of the 2023-24 aid cycle, financial aid applicants will see a simplified FAFSA form, reduced from 108 questions to 36, alleviating stress for millions of families who complete the assessment annually. The legislation also will allow more aid applicants to have their taxed and untaxed income automatically transferred into the FAFSA. 

Sen. Lamar Alexander (R-Tenn.), who recently ended his Congressional tenure, had championed the change for years and says the reforms will dismantle unnecessary complications and barriers for low-income students pursuing higher education. 

Executive Director of the National College Attainment Network Kim Cook hailed the decision to simplify the FAFSA form, stating that the changes are a “step toward a more equitable higher education system, especially for students of color and students from low-income backgrounds. 

Abandoning the EFC, introducing the SAI

The new law also does away with the Expected Family Contribution (EFC)—the output dollar figure that FAFSA filers see after disclosing their family income and household assets to determine how much aid can be allocated for the applicant. The EFC will be replaced by a new Student Aid Index (SAI), which will allow for a more nuanced assessment. For instance, some FAFSA-filers will now qualify for a “negative SAI” of up to -$1,500; they still will receive the same maximum Pell grant as students with a $0 SAI, but the negative score will help tell colleges and universities that those students have the greatest need. 

College affordability advocates applauded the change. The EFC has been “a misleading and widely confusing term for what is, in fact, a formula for allotting federal aid funds—not a measure of what a family can or should pay,” The Chronicle writes. 

“Good riddance,” Ron Lieber says in The New York Times. “Goodbye to all that—to the judgment those words implied, to the things they meant but did not say and to all of the euphemisms that have seeped into a system that has led to so much anxiety for so many families and the professionals who counsel them.”

Sara Goldrick-Rab, Temple University professor and president and founder of the Hope Center for College, Community, and Justice, echoed the sentiment. “You get those words very early in the relationship,” when the college or university is just getting to know the student. “It doesn’t build trust.” 

Pell grant restrictions lifted for incarcerated students

The recent stimulus package also put an end to a two-decade-long ban on Pell grants for incarcerated students and those convicted of drug-related offenses. According to The Chronicle of Higher Education, the milestone decision will allow 1.7 million more students to qualify for maximum Pell grant awards annually. 

Related: Education department doubles number of Second Chance Pell institutions >

Lawmakers on both sides of the aisle advocated for the reversal of the Pell grant ban, which began in 1994 as part of a crime bill. “[The reversal] will increase access to opportunity for people leaving prison, in terms of their career paths and their ability to take care of themselves and their families post-release,” Margaret diZerega, director of the Center on Sentencing and Correction at the Vera Institute of Justice, tells Diverse Issues in Higher Education. She adds that lifting this ban is a major step forward in higher education equity for Black and brown people who have been disproportionately affected by mass incarceration. 

The new legislation also codifies a $150 increase in the maximum Pell grant award for the 2021-22 aid cycle, bringing it to $6,495. In addition, FAFSA filers soon will have access to a “lookup table” that allows students to quickly see whether they are guaranteed to receive a maximum—or at least a minimum Pell grant—to encourage more students to apply for federal financial aid.

Under the new law, dependent students whose parents are married and earn less than 175 percent of the poverty level would receive a full Pell award, as would dependent students with a single parent earning less than 225 percent of the poverty level. Independent students earning less than 225 percent also would receive the maximum grant. “There’s a recognition here of single parents, particularly single parents who are students themselves, which are a growing part of the college population,” Warick told The Chronicle.

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