The Simplified FAFSA 2021

January 25, 2021

By: Kelly Alblinger

Staff Writer

It’s true! The economic chaos initiated by the pandemic has inspired an overhaul of the burdensome FAFSA under the COVID-19 relief legislation included within the Consolidated Appropriations Act of 2021. The new form has been streamlined from 108 questions down to about 36. The FAFSA Simplification Act will become effective July 1, 2023, and the changes will apply to the 2023-2024 school year. This implementation delay gives the Department of Education time to execute the necessary modifications. 

Simplification, however, does not mean easy. And for IECs, it represents a fresh learning curve. New terminology, new formulas and calculations, and sweeping changes to old guidelines will all take time to understand. 360 PLANNER has compiled an overview of some of the most significant FAFSA reforms below. For a comprehensive list of the many changes, we refer you to this excellent article in Forbes Magazine by personal finance contributor Mark KantrowitzPandemic Relief Package Simplifies FAFSA. 

New Terminology 

  • Expected Family Contribution will be replaced by Student Aid Index. The old term can be confusing, leading families to believe that the EFC will be the total amount they pay out of pocket for college. The new term is a more accurate reflection of a student’s financial status and is also meant to be inclusive of different personal living situations. 
  • Simplified Needs Test will now be known as Applicants Exempt from Asset Reporting. As with the EFC, this name change is meant to clarify a formerly vague definition. 

Cost of Attendance Changes (COA) 

Changes to the COA are lengthy but generally beneficial. Noteworthy changes include: 

  • Colleges will be required to disclose all of the elements of COA on their website. This information must be included wherever the school lists tuition and fees. 
  • The addition of two new housing allowances. 
  • Housing allowances must be based on the average or median housing charges, whichever is greater. 
  • The inclusion of the cost of obtaining professional licensing, certification, or first professional credentials will be mandatory. 
  • Updated allowances for computers, transportation, meal plans, and personal expenses 


Changes to the Income Protection Allowance (IPA) 

  • IPA will no longer be reduced by the number of children in college, yielding greater income protection 
  • For parents, IPA has been increased by 20% over the 2021-2022 schoolyear 
  • For dependent students, IPA has been increased by 35% over the 2021-2022 schoolyear 
  • Independent students gain an IPA increase of 35-60% depending upon their personal situations 


Multiple Student Enrollment 

The updated FAFSA will still collect data regarding multiple students from the same family enrolled in college, but it will no longer divide the parent assessment between students. This represents a significant reduction in the amount of financial aid available for middle to high-income families with multiple enrollees. It should not affect lower-income students with a zero Student Aid Index. 


New Pell Grant Eligibility Criteria 

  • Multiple new opportunities to qualify for the Pell Grant and to receive greater grant awards 
  • Students who are incarcerated will qualify for the Pell Grant 
  • Students (age 33 or younger) with a parent who died while serving in the Armed Forces (after September 11, 2001) or whose parent died in the line of duty while serving as a public safety officer automatically qualify for the maximum Pell Grant 


Unfortunately no changes have been made to the Asset Protection Allowance (APA). This allowance has been dropping in recent years as fewer parental assets are shielded from FAFSA calculations, and it is expected that the APA will be discontinued altogether within the foreseeable future. 


While high-income families won’t see many benefits from the EFC changes, they will still be eligible for merit awards or institutional grants. According to Road 2 College, the amount of free money available from colleges is FOUR TIMES the amount given out via private scholarships. IECs can help their students target generous institutions through the 360 PLANNER platform. 


Keep in mind that even with a very high EFC, it is still in a student’s best interest to complete the FAFSA form. Federal work-study programs and student loans, as well as school-based awards, rely on the FAFSA for key information. 360 PLANNER enables IECs to offer assistance to families in completing the FAFSA, which is beneficial at any time, but becomes an added value for IECs during this period of transition to the “simplified” form. 

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