By Thomas Dowling

Anyone who has been through the application process applying for financial aid for college recognizes that it is a frustrating and confusing process.

As part of the Consolidated Appropriations Act of 2021, recently approved new provisions were included to help students and parents apply and receive financial aid for college.

The updated FAFSA (Free Application for Federal Student Aid) will be available starting Oct. 1, and most of the new provisions should go into effect for the 2023- 2024 academic year.

The FAFSA application is a form completed by current and incoming college students to determine their eligibility for financial aid. The number of questions on the FAFSA form will be reduced from 108 to no more than 36, along with a more user-friendly site and process.

Also, the term Expected Family Contribution (EFC) is now referred to as Student Aid Index (SAI). This is because the final calculation did not actually determine what a family can afford to pay; it was meant to help determine aid eligibility. The belief is this new name will more accurately reflect what the calculation represents.

INCOME PROTECTION ALLOWANCE: The Income Protection Allowance is a “cushion” amount that is not counted as income in the financial-aid formula. The Parental Income Protection Allowance increases by 20% and the Student Income Protection Allowance increases by 35%.

UNTAXED INCOME: Grandparent “untaxed income” has often hurt students applying for financial aid. This occurs when a grandparent owns a 529 Plan with the grandchild as the beneficiary. When the grandparent provides money from the 529 Plan to pay for the grandchild’s school expenses, this was considered ‘untaxed income’ to the grandchild in the following year and could, and likely would, reduce the amount of financial aid received by the student. Now, starting for the 2024-2025 award year, that distribution will no longer count as untaxed income which could increase the amount received in financial aid for the student.

Additionally, workers’ comp and veterans’ education benefits will no longer be counted toward untaxed income.

CHILD SUPPORT: In cases where child support is received, the income will now be considered part of your assets instead of income. Assets are assessed at a lower rate than income; therefore, for certain students it could mean more money received in financial aid.

FINANCIAL AID APPEAL: There are also changes to the financial aid appeal. All colleges are now required to hear appeals; therefore, colleges and their financial aid offices can no longer maintain a policy of denying all financial aid appeals. Hopefully, this will increase the amount of financial aid that is awarded..

PELL GRANTS: The Department of Education awards Pell Grants based on the Expected Family Contribution calculated on the FAFSA. In the past it could take some time to find out eligibility, but now a student will be able to look up, even before they apply for aid, whether they can expect to receive a Pell grant.

Often when you receive benefits, there may be some that are taken away:

‘DISCOUNTS’: You will no longer receive discounts based on the number of children attending college at the same time. In the past, if your EFC was calculated as $40K and you had two children in college at the same time, it could be reduced to $20K per child. This will no longer happen. Without that reduction it would be $40K per child.

DIVORCED PARENTS: Currently, if a student’s parents are divorced, it is the custodial parent who completed the FAFSA form, using his or her assets and income. After the changes take effect, it will be the parent who provides the most financial support who completes the FAFSA. And in situations where the support is equal between parents, it will be the parent with the higher Adjusted Gross Income (AGI).

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Thomas M. Dowling CFA, CFP®, CIMA® is Head of Wealth Management with Alliance Global Partners. Visit