FAFSA Simplification Act and Financial Aid Changes

SAI Handcalc Workshop Crystal Tangsrud Financial Aid Business Analyst NDUS - CTS

FAFSA Simplification. ...because 'simple' and 'FAFSA' belong in the same sentence; right?? ...because who needs sanity anyway. ...reinforcing why you should never let the government simplify anything! ...making the somewhat possible, truly impossible. ...simplicity through complexity! ...Making rocket science look like child's play. ...a masterclass in patience and perseverance. ...Simple?? For WHO??! ...Making tax season look like a vacation. ...where simplicity is a four letter word. ...the new Extreme Sport. ...where "simplification" means "try not to cry". 2

Agenda The Basics Calculating an SAI Class Exercise Group Exercises Individual Exercises Wrap-up

The Basics 4

The Basics The information we receive will change. FADDX requires consent Reduction in questions Federal Methodology is changing SAI vs. EFC Low as -1500 No # in college Small business and family farms included Pell Eligibility is changing Maximum Minimum Standard 5

Assets Exclusion The following applicants are eligible for the asset exclusion provision: An applicant who qualifies for an automatic Maximum Pell Grant award (as described below under Calculation of a Federal Pell Grant ) An applicant who received a benefit under a federal means-tested benefit program in the prior two completed calendar years (i.e., 2022 or 2023 for the 2024-25 award year) or whose parent or spouse received such a benefit during the same period A dependent applicant whose parents (1) have a total AGI of less than $60,000; (2) do not file a Schedule A, B, D, E, F, or H (or equivalent successor schedules) on their federal tax return; and (3) either do not file a Schedule C or file that form with a net business gain or loss of $10,000 or less An independent applicant who (1) has a total AGI (including the student s spouse, if any) of less than $60,000; (2) does not file a Schedule A, B, D, E, F, or H (or equivalent successor schedules) on the federal tax return; and (3) either does not file a Schedule C or files that form with net business gain or loss of $10,000 or less https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-08-04/fafsa- simplification-act-changes-implementation-2024-25 6

Student Data Parent Data FAFSA Processing Center (FPS) Spouse Data Your institution s Student Information System may also have internal calculations for an SAI. SAI on the ISIR In other words, you shouldn t have to do this by hand. But it helps to learn! 7

Student Data FAFSA Processing Center (FPS) Parent Deny Consent Rejected ISIR Side Note: If any contributor does not provide consent FPS will send a rejected ISIR with no SAI. 8

Student Data Unusual Circumstances FAFSA Processing Center (FPS) Side Note: Students who indicate they have unusual circumstance will not have to provide parent data will be given the status of Provisionally Independent and a Provisional SAI. Provisional SAI 9

Who is a Single Parent? Definition of Single Parent for Pell Grant Purposes The FSA amendments define a single parent as an individual who was (as defined by the relevant sections of the Internal Revenue Code) a head of household, a surviving spouse, or an eligible individual for purposes of the Earned Income Tax Credit. The term single parent applies only to a parent of a dependent student or an independent student who is a parent. Notably, the construction of the single parent definition for the purposes of determining Pell Grant awards under the AGI provisions is not precisely aligned with the criteria for which parents must provide information when completing the FAFSA to calculate the SAI. (See the Dependent Students with Divorced or Separated Parents section.) From https://crsreports.congress.gov/product/pdf/R/R46909 10

Calculating an SAI and Pell 11

The Process Pell Eligibility and SAI Guide 12

The Process Max or Min Pell Grant Resource 2022 Poverty Guideline 13

The Process Step 1 Maximum Pell Grant Eligibility Step 2 SAI Calculation Step 3 Minimum Pell Grant Eligibility 14

Always asking: Do I have the SAI and Pell? If you don t have both, continue on through all steps. 15

Step 1 Maximum Pell Grant Eligibility Dependent Student 1. The student s parent(s) is not required to file a federal income tax return; or 2. The student s parent is a single parent and has an AGI greater than zero and less than or equal to 225% of the poverty guideline for the applicant s family size and state of residence; or 3. The student s parent is not a single parent and has an AGI greater than zero and less than or equal to 175% of the poverty guideline for the applicant s family size and state of residence. Independent Student 1. The student (and spouse, if applicable) is not required to file a federal income tax return; or 2. The student is a single parent and has an AGI greater than zero and less than or equal to 225% of the poverty guideline for the applicant s family size and state of residence; or 3. The student is not a single parent and has an AGI greater than zero and less than or equal to 175% of the poverty guideline for the applicant s family size and state of residence. 16

Step 1 Maximum Pell Grant Eligibility SAI for Maximum Pell Grant Recipients 1. A dependent student whose parents are not required to file a federal income tax return OR an independent student (and spouse, if applicable) who is not required to file a federal income tax return for the prior-prior tax year is assigned a SAI equal to -1500. 2. Other students eligible for a maximum Pell Grant will be assigned a SAI equal to 0 or a calculated SAI (Step 2), whichever is less. 17

Step 1 Maximum Pell Grant Eligibility Is the student eligible for Max Pell? No Continue to Step 2 Yes Yes Continue to Step 2 SAI = 0 OR Step 2 (whichever is less) Required to file? No Assigned -1500 SAI 18

Do I have the SAI and Pell? 19

Step 2 SAI Calculation The SAI is determined using one of three formulas, each described in more detail below: Formula A Dependent students; Formula B Independent students without dependents other than a spouse; and Formula C Independent students with dependents other than a spouse. 20

Step 2 SAI Calculation No Is the student Pell eligible? SAI is calculated Pell = zero No Pell = Max Pell - SAI Yes No Is the student Max Pell Eligible Is SAI greater than max Pell? Yes Continue to Step 3 Yes Yes No SAI = calculated Is SAI less than zero? SAI = zero 21

Do I have the SAI and Pell? 22

Step 3 Minimum Pell Grant Eligibility Dependent Student 1. The student s parent is a single parent and has an AGI less than or equal to 325% of the poverty guideline for the applicant s family size and state of residence; or 2. The student s parent is not a single parent and has an AGI less than or equal to 275% of the poverty guideline for the applicant s family size and state of residence. Independent Student 1. The student is a single parent, and the AGI is less than or equal to 400% of the poverty line; or 2. The student is a parent and is not a single parent, and the AGI is less than or equal to 350% of the of the poverty guideline for the applicant s family size and state of residence; or 3. The student is not a parent, and the student s (and spouse s if applicable) AGI is less than or equal to 275% of the of the poverty guideline for the applicant s family size and state of residence. 23

Step 3 Minimum Pell Grant Eligibility Does the student meet the criteria for Min Pell? No SAI is calculated Pell = zero Yes Pell is 10% of Max Pell 24

Do I have the SAI and Pell? 25

Example 1 Dependent Student 4-person household with 2 student in college Parents are married Parent Filed 1040 as married joint Parent AGI: $40,890 Parent: $30,890 (Age: 50) Parent Spouse: $10,000 (Age: 45) No untaxed income No income offsets Taxes paid: $0 No assets reported Student Student will not file Student had no income Student has no assets 26

Example 2 Dependent Student 4-person household with 3 student in college Parent is unmarried Parent Parent is not required to file taxes Untaxed income is $13,764 No income offsets Taxes paid: $0 No assets reported Student Student will not file income is $2,699 Student has no assets 27

Example 3 Independent Student No children or dependents Filed 1040 as single (Age: 26) AGI: $19,594 Earned income: $19,594 No untaxed income Student had education credit of $1,500 Taxes paid: $0 Student has $2,000 in checking account* *Review Assets Exclusions Rules 28

Example 4 Independent Student 3 in household with 1 in College Married (Ages 45 and 40) Filed 1040 as Married Joint AGI: $59,331 Earned income: $59,331 (student and spouse both work) No untaxed income No income offsets Taxes paid: $4543 No assets 29

Example 5 Dependent Student 4 in household with 1 in College Married (Ages 59 and 57) No federal means-tested benefits Parents Parents Filed 1040 as Married Joint Parents AGI: $79,506 Parents Earned income: $76,704 (both parents work) Parents Untaxed Portions of IRA Distributions: $2,820 No income offsets for parents Parent Taxes paid: $6,067 No assets Student Student AGI: $10,137 Earned Income: $10,137 No untax or income offset for student Student Taxes paid: $0 Student Savings: $3,248 30