Education Department's FAFSA inflation fix will free up $1.8 billion more in aid for students

The U.S. Department of Education says it plans to replace a key a part of the brand new Free Application for Federal Student Aid system, which will outcome in $1.8 billion more in aid for college-bound students this yr.

The announcement comes weeks after the simplified FAFSA tender launched Dec. 30 after a monthslong delay.

Since then, the 2024-25 kind has been plagued by problems.

How inflation knowledge impacts scholar aid

One of the issues has been particularly associated to the brand new FAFSA’s affordability calculation, known as the “Student Aid Index,” which estimates how a lot a household can afford to pay. At launch, the brand new FAFSA relied on outdated shopper value index figures from 2020, earlier than the latest runup in inflation.

“In prior years, it would not matter all that a lot as a result of inflation was low,” in response to Kalman Chany, a monetary aid marketing consultant and writer of The Princeton Review’s “Paying for College.”

In this case, “the numbers are considerably understated.”

The Consolidated Appropriations Act stipulated that the Education Department is required to replace the SAI tables yearly based mostly on the most recent CPI knowledge.

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In the buildup to the tender launch, the Education Department stated it did not plan to replace these tables this yr, however will replace them for the 2025-26 aid cycle.

However, a division spokesperson has now confirmed that these inflation changes will be made this yr.

“The U.S. Department of Education will be updating the supporting tables used in the Student Aid Index (SAI) calculation that account for inflation for the 2024-2025 award yr,” the spokesperson stated. “By doing so, students will have entry to an extra $1.8 billion in federal scholar aid.”

More students may qualify for a Pell Grant

Making these numbers present will cut back the portion of a household’s earnings that’s thought-about accessible for instructional bills, ensuing in a decrease Student Aid Index and probably elevated monetary aid eligibility, in response to Justin Draeger, president of the National Association of Student Financial Aid Administrators.

As a outcome, more middle- and higher-income students may qualify for a Pell Grant, a kind of aid accessible to low-income households, added increased schooling knowledgeable Mark Kantrowitz. Currently, the maximum Pell Grant award is $7,395.

“Students on the sting of Pell Grant eligibility could possibly be most affected,” Kantrowitz stated.

There will be much less of an impact on lower-income students whose anticipated household contribution was already $0.

Schools are ready on FAFSA data

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