Federal Financial Aid Will Be Easier to Apply For–And a Bit More Generous

Note: This post that I wrote was initially published at The Conversation. If you’re the type who enjoys reading 5,000+ pages of legislative text, the law that changed federal financial aid is available here.

How is applying for federal student financial aid about to change?

The good news is the Free Application for Federal Student Aid (FAFSA) will go from having 108 questions to 36 questions, and most students will only have to answer a smaller set of questions about family income and household size. The not-so-good news is that this simplified form will not be available to students until October 2022 to determine aid for the 2023-24 academic year.

Also, students with family incomes below 175% or 225% of the federal poverty line (which one depends on their family circumstances) will automatically qualify for the maximum Pell Grant, which is the main federal grant given to students from low- to middle-income families as of 2023.

For example, a high school senior in a family of three led by a single parent would receive the maximum Pell grant if their parent’s income is below about $50,000 per year. Currently, only about one in five students with family incomes around $50,000 per year gets the maximum Pell grant. Currently, most students have to file the FAFSA to know the size of their Pell grant.

Automatic qualification will make it easier for students to know how much federal financial aid they can count on getting well in advance of going to college.

Are any new people eligible who weren’t before?

The new law also gets rid of a 1994 ban on Pell Grants for incarcerated individuals. This change means that people can get financial help to begin to earn college degrees while they are still behind bars instead of having to wait until their release. This change will benefit everyone, as receiving education while in prison helps reduce the chances that someone will return to prison.

Also, Pell Grant eligibility is being reset for students who went to colleges that closed while they attended. This means these students can finish their studies elsewhere. Without this change, anyone who had exhausted their Pell eligibility after 12 semesters would likely struggle to find the money they need to finish up their degree at another college.

Is the ‘expected family contribution’ a thing of the past?

Yes – sort of. Ever since 1992, the FAFSA has generated an “expected family contribution.” This number determines how much money students and their families can receive in federal financial aid. It is based on how much money the federal government expects students and their families to contribute toward the price of their education.

However, families are often unable or unwilling to pay this amount of money. The formula has also been adjusted over the years to decrease the number of students who receive the maximum Pell Grant, requiring families to pay more for college. In reality, the expected family contribution provides a rough ranking of families’ resources to help the federal government and others give out limited aid dollars.

Beginning in October 2022, the government will ditch the term “expected family contribution.” It will instead rely on a “student aid index,” the same term that had been used before 1992, that more accurately reflects how the FAFSA is used to determine financial aid. The index also does not send the message that students have to contribute a certain amount.

But in reality, the student aid index is still the amount that the federal government will expect students and families to pay for college.

In good news for students and their families, the law allows for the student aid index to be as low as -$1,500 instead of being limited to zero. This is something that I have called for in my research because it allows students to get more financial aid and helps colleges and states identify students with the greatest financial need. The change in the student aid index will not give students more financial aid from the federal government, but it will allow them to obtain up to $1,500 more in grants, loans and other financial aid from other sources.

Is the government increasing federal student financial aid in any way?

The government is also increasing the maximum Pell Grant to $6,495, a $150 increase, in the 2021-22 academic year. This is basically enough to keep up with inflation. A bigger change is that more students will qualify for the maximum Pell Grant because of increases to the income limits for receiving the grant. But while more students will receive federal grants, students with the greatest financial need will not see increases in their Pell grants other than to keep up with inflation.The Conversation

Trends in Zero EFC Receipt

In my third blog post using newly-released data from the 2015-16 National Postsecondary Student Aid Study (NPSAS), I turn my attention away from graduate and professional students and toward undergraduate students. Here, I update a 2015 article that I wrote for the Journal of Student Financial Aid examining trends in the share and types of students who have an expected family contribution of zero—the students who have the least financial ability to pay for college and thus qualify for the maximum Pell Grant.

Using the handy TrendStats tool on the National Center for Education Statistics’s DataLab website, I looked at six NPSAS waves from the 1995-96 to 2015-16 and pulled data for all students and then by student and institutional characteristics. The full spreadsheet can be downloaded here (including data by gender and age that I do not cover in this post), and I go through some of the highlights below.

Overall, the percentage of students with a zero EFC has steadily increased every four years since the 1999-2000 academic year in spite of ebbs and flows in the economy. Part of this is likely due to changes in the rules of who automatically qualifies for a zero EFC based on family income and means-tested benefit receipt (currently, the income limit is $25,000 per year), but increased student diversity in American higher education also plays a role. The percentages in each year are as follows:

1995-96: 18.6%

1999-2000: 17.7%

2003-04: 20.7%

2007-08: 25.4%

2011-12: 37.9%

2015-16: 39.1%

There are stark differences in the percentage of students with a zero EFC by dependency status that have grown larger over time. Independent students with dependents of their own have always been the most likely to have a zero EFC, especially because childcare obligations often limit work hours (resulting in a lower household income). The percentage of students in this category with a zero EFC remained between 35 and 40 percent through 2007-08 before spiking to 61% in 2011-12 and 67.3% in 2015-16. Dependents and independent students with no dependents had generally similar zero EFC rates in the teens through 2003-04, but then independent students started to qualify for zero EFCs at much higher rates. By 2015-16, the gap grew to 18 percentage points (42.2% versus 24.2%).

Turning next to institutional type, for-profit colleges (which tend to enroll more independent students with families of their own) have traditionally had higher zero EFC rates than other sectors. 62.2% of students at for-profits had a zero EFC in 2015-16, up from 56.8% in the last NPSAS wave and around 40% before the Great Recession. In the 1990s, community colleges, public 4-year colleges, and private nonprofit 4-year colleges all had zero EFC rates of around 15%. Community colleges’ rates passed 40% in 2011-12, while four-year public and nonprofit colleges’ rates exceeded 30% in 2015-16. Notably, the percentage of zero EFC students at four-year private nonprofit colleges jumped from 25.7% to 30.5% in this NPSAS wave, a much larger increase than among public 4-year colleges.

Readers of my last two blog posts should not be terribly surprised to see that African-American students have been the most likely to have a zero EFC across the last six NPSAS administrations, although there was a slight decrease between 2011-12 and 2015-16 (60.0% to 58.2%). American Indian/Alaska Native students had the next highest zero EFC percentage (51.2%), followed by Hispanic/Latino students (47.6%), Asian students (39.2%), and white students (29.8%). Multiracial students saw an increase in zero EFC rates from 39.1% to 41.8%, but this group is not shown in the chart due to changes in how the Department of Education has classified race and ethnicity over time.

Finally, I examine zero EFC receipt trends by parental education—beginning in the 1999-2000 academic year due to changes in the survey question following the 1995-96 NPSAS. There is a clear relationship between parental education and zero EFC rates, with more than half of all students whose parents never attended college having a zero EFC in 2015-16 and progressively lower rates for students with highly-educated parents. However, two trends stand out among non-first-generation students. The largest increase in zero EFC rates by parental education in the last two NPSAS waves was among families with some college experience or an associate degree (rising from 37.9% to 42.6%). Meanwhile, even among students who had at least one parent with a graduate degree, 27.5% still qualified for a zero EFC.

Readers, if there are any pieces of the new NPSAS data that you would like me to examine in a future blog post, leave me a note in the comments section or send me a tweet. I’m happy to dig into other pieces of the dataset!