The FAFSA itself will be available on October 1. In the meantime, the Department of Education has released the EFC Formula Guide for this year’s FAFSA in case you’d like to take the data out for a spin before filing. Before you do that, a few safety reminders:
- The FAFSA is not the tooth fairy. The only thing the FAFSA guarantees is access to federal Title IV student aid funds: Pell grants and other federal grants (FSEOG, TEACH, military service grants), direct student loans, and work-study.
- The FAFSA does not obligate colleges to meet students’ financial need. Instead, it is a tool colleges use to evaluate all students’ ability to pay on a consistent set of metrics. If financial aid is important to you, you need to apply to colleges that meet financial need.
- Depending on the colleges you apply to, you might also need to complete the CSS Profile. The Profile is completed in addition to the FAFSA, since the FAFSA is required for federal dollars.
If you are the parent of a high school senior, the following will save you more money than trying to manage your assets for the FAFSA:
- Doing net price calculators for colleges your student is interested in to determine whether they’re affordable for your family.
- Having a goals-based conversation with your student about how you intend to support them financially in college.
- Researching transfer credit policies at colleges your student is interested in to learn whether they’ll get college credit for their advanced (AP, IB, dual credit, etc.) high school classes.
- Researching available merit aid at the colleges your student is interested in.
I’ll step off my soapbox now and turn to this year’s EFC Formula Guide. As always, the FAFSA looks at four “buckets” in calculating your Expected Family Contribution:
- Parent income, both taxed and untaxed. This year’s FAFSA uses 2021 income for parents and students. If your student is a high school senior, that means it’s the income year that began Jan. 1 of sophomore year and ended Dec. 31 of junior year.
- Parent assets. This includes non-retirement assets such as checking and savings accounts, 529 accounts (for all children in the family), vacation homes or investment properties and taxable brokerage accounts. The family’s primary residence does not count, nor do retirement savings accounts.
- Student income. Students get an income protection allowance of $7,600 on this year’s FAFSA, so their income only counts if it’s more than that.
- Student assets. This one can trip families up, especially with wages as high as they are right now. If your student worked 20 hours per week this summer at the national average hourly pay of $17.50, they would have earned $3,500 this summer, much of which might still be sitting in their bank account.
Normally this is where I start to talk about what’s changed on this year’s FAFSA. This year I’m going to start with what hasn’t changed. Specifically, the major FAFSA formula changes from the 2020 stimulus bill have not been implemented. What has changed? The items subject to inflation and other annual adjustments.
- Asset Protection Allowance: The big news is that, as has been projected for a while, the Asset Protection Allowance has been eliminated for all families. That means that 100% of your assets count towards your ability to pay. Here’s a detailed explanation of why, in an era of rampant inflation and rising interest rates and college costs, the Asset Protection Allowance is going down, not up.
- Income Protection Allowance: Parents and students each get an Income Protection Allowance, which is an amount of income that doesn’t count towards ability to pay. Both of these have gone up since last year. For parents, the allowance is based on family size and number of college students in the household. A family of four with two college students gets an Income Protection Allowance of $28,980 this year, up over $2,000 from last year’s $26,830. Dependent students get $7,600 this year, up from $7,040 last year.
- Employment Expense Allowance: This allowance is for single parents or two-parent households where both work. The allowance– subtracted from income in calculating Available Income– increased to $4,700 from $4,000 or total earnings of the lower-paid spouse, whichever is less.
I’ll go into all of this in more detail between now and October. If you’ve got this far, congratulations: here’s the 2023-2024 EFC Formula Guide.
Shameless plug: The FAFSA is confusing, and it’s just one part of the process! My online course, The College Financial Plan, helps families of high school students get a great education at a price that works. My book How to Pay for College, available from Amazon and bookstores everywhere, demystifies the college funding landscape and helps families anywhere in the process of education planning— from newborn to senior— develop a plan to get your kids through college without sacrificing your other goals along the way.