After high school seniors committed to the school of their choice for this fall, I thought I’d cover some upcoming college planning changes. There are many new grant rules that come into effect as a result of the Consolidated Appropriations Act (CAA) of 2021 that contain provisions that expand the provisions of the Coronavirus Aid, Relief, and Economic Security (CARES Act).
One of the CAA’s biggest results is changes to the Free State Student Aid Application (FAFSA), which is completed each academic year by prospective and current college students to determine if they are eligible for financial assistance. The new regulations will be published in FAFSA 2022 and will go into effect for the 2023-2024 academic year, giving the U.S. Department of Education time to implement the changes.
Some of the planned changes include the following:
The number of questions is reduced from 108 to around 36.
Currently, in a two-parent household, either parent can graduate from FAFSA. However, if the parents are divorced or separated, the custody parent must complete the FAFSA. The custody parent is defined as the parent with whom the child lives for most of the 12 month period ending on the day of filing the FAFSA. A major benefit of this is that if the custody parent is the low-wage recipient, only the parent’s income and assets are counted for financial aid purposes.
The new legislation requires the parent who provides the most financial assistance to take out the FAFSA instead of the caring parent. In cases where the assistance provided is 50/50, the parent or household with the highest Adjusted Gross Income (AGI) is used by default.
Untaxed income and benefits have been streamlined to include only deductions and payments to pension plans that are listed on the federal tax return. The child benefit received annually is no longer classified as untaxed income, but as an asset.
There are several changes to the Income Protection Allowance (IPA). The number of children in college will not reduce the allowance. The IPAs in the years 2023 to 2024 are intended to increase the amounts for parents by 20 percent compared to 2021 to 2022. 35 percent for dependent students, independent students with no dependents and married students with dependent students; and 60 percent for single independent students with dependents.
Funding eligibility is currently increasing for families with more than one child enrolled in college at the same time. Parents with twins / multiples or parents whose children are closer together had the potential to benefit greatly. However, under the new legislation, FAFSA will no longer grant this discount.
This change reduces financial eligibility for families with more than one child enrolled in college at the same time. For example, a family with a calculated EFC of $ 20,000 before switching could see a decrease of up to 50 percent if they had two kids in college – that would mean an EFC of $ 10,000 per child. Without this discount, the calculated EFC would be $ 20,000 per child.
Students no longer lose their eligibility for a previous drug abuse conviction or for not registering with the Selective Service. As a result, these questions will be removed.
The term Expected Family Contribution (EFC) is now referred to as the Student Aid Index (SAI). The EFC is an index number that universities use to determine a family’s eligibility for financial assistance. The term has often been misleading and confusing for families as it implies that it is either the amount of money a family has to pay for college or the amount of help they receive.
The EFC (soon to be SAI) is based on several factors including income, non-retirement wealth, education savings account (s), household size, and marital status to name a few. Many middle- and high-income families pay more than the EFC, as schools rarely offer an aid package that covers 100% of the financial need.
Changes to the definition of participation costs. This includes many changes that have become necessary in the wake of COVID-19, e.g. B. reimbursement of computing costs for all students (not just those who are half-time or longer enrolled) and sharing the cost of room and board to provide a more accurate account of how much is spent on each, an increase in housing benefit and a clarification of how they are calculated.
The largest source of funding is the federal government, and the majority is given through the Pell Grant program. It is the premier federal scholarship for low and middle income families. The new legislation simplifies eligibility for Pell Grant by ensuring that families who account for less than 175% of federal poverty receive the maximum award, which is $ 6,345 for the 2021-22 school year. The bill also increases the maximum amounts by $ 150, bringing the maximum premium to $ 6,495.
It is important to note that there could be other changes with a new presidential administration that means a new education minister. Stay tuned!
Take advantage of Michigan College Planning’s college planning workshops to learn more about how to reduce stress, save time and potentially money during the college planning process.
Visit www.michigancollegeplanning.com or https://www.tcaps.net/programs/leap/ for locations and dates.
The workshops are informative and include steps you can take now to ensure you understand the cost of attending and how to afford college. If you are unable to attend a workshop, contact Michigan College Planning with your questions.
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