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Borrower Beware: Upcoming Changes to FAFSA

FAFSA & Pandemic Relief

Congress continued its habit of tucking smaller bills into large, well-publicized ones this past December when it included a dramatic overhaul to the Free Application for Federal Student Aid (FAFSA) and financial aid rules into federal pandemic relief legislation.

As with most legislation, there are winners and losers. For parents of high school sophomores and/or children who will still be in college Fall 2023 and filing for need-based financial aid, these changes will impact you.

FAFSA Redesign Effective 2023-2024 Academic Year

The changes will be effective for the 2023-2024 school year. This means parents filling out the FAFSA as early as Oct. 1, 2022 will be impacted by the changes.

FAFSA Redesign: Shorter and Simpler Application

One of the big positives of the legislation is the simplification of the application. Currently, the FAFSA has a maximum of 108 questions and that’s being reduced to less than forty, trimming a six-page form down to two. It will also affect the determination of financial need for low-, middle- and high-income students.

FAFSA Redesign: No More Penalty for Generous Grandparents

Gone will be the 50% penalty when grandparents, aunts and uncles, friends, or others outside the immediate family help with college costs as exists today. The new FAFSA will not even ask this question. 

FAFSA Redesign: Multiple Children in College Benefit Disappearing

There will be a decrease aid eligibility for middle- and high-income students when there are multiple children in college. According to financial aid professional Mark Kantrowitz more than half of families with two or more children will be affected by this change. About a fifth of these families have one year of overlap, about a quarter have two years of overlap, and 14% have three or four years of overlap.

Mark breaks it down in his article for the website

“The Income Protection Allowance (IPA), which shelters a portion of parent income, is currently reduced by a factor based on the number of children in college at the same time. For example, the IPA is reduced by $3,310 per child in college on the 2021-2022 FAFSA. Starting with the 2023-2024 FAFSA, the IPA will no longer be reduced when two or more children are enrolled in college simultaneously. This will yield a higher IPA, sheltering more parent income from need analysis. However, the 2023-2024 FAFSA will also no longer divide the parent contribution portion of the Student Aid Index (previously, Expected Family Contribution or EFC) by the number of children in college. This will yield a higher Student Aid Index when there are two or more children in college at the same time.”

FAFSA Redesign: Divorced or Separated Parents

If the parents have an informal separation, they will be considered to still be married, following IRS rules.

The parent responsible for filing the FAFSA will be based on whichever parent provides more financial support to the student, not the parent with whom the student resides. What will count is which parent claims the child on the tax return.

FAFSA Redesign: Other Income

Other types of income that will no longer be reported on the FAFSA include workman’s compensation and veterans’ education benefits.

Child support received will be reported as an asset on the FAFSA, instead of as untaxed income which yields a more favorable treatment.


This blog post was written Janice Royal, MA. She is the Founder and CEO of Royal College Consulting.

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