Author: Paul Martin

Income limits to receive the Pell Grant

by Paul Martinin Uncategorized

Pell Grant eligibility

The FAFSA determines whether the student qualifies for the Maximum Pell Grant based on a parent’s Adjusted Gross Income (AGI) in the base year, family size and state of residence. When the parent’s AGI is at or below the limit based on marital status and family size, the student qualifies for the Maximum Pell Grant. The Maximum Pell Grant is determined annually by Congress, and the amount for the 2025-26 Award Year is $7,395.

In addition to receiving the Maximum Pell Grant, the student is also assigned a Student Aid Index (SAI) equal to $0. As well, neither student nor parent assets will be included in the calculation of the Student Aid Index.

This table provides the parent income limits for a dependent student for the three FAFSA cycles: 2025-26 FAFSA, 2026-2027 FAFSA and 2027-28 FAFSA.

    2025-26 FAFSA

    2025-26 FAFSA Income Limits
    by marital status and family size for the lower 48 states

    Family sizeunmarried parent with 2023 AGI at or belowMarried parent with 2023 AGI at or below
    2$44,370N/A
    3$55,935$43,505
    4$67,500$52,500
    5$79,065$61,495
    6$90,630$70,490
    7$102,195$79,485
    8$113,760$88,480
    For an unmarried parent, the AGI threshold is based on 225% of the 2023 federal poverty level, given family size.For married parents, the AGI threshold is based on 175% of the 2023 federal poverty level, given family size.

    TIP: Your Adjusted Gross Income can be found on your personal tax return, 1040, line 11.

    2026-27 FAFSA

    2026-27 FAFSA Income Limits
    by marital status and family size for the lower 48 states.

    Family sizeunmarried parent with 2024 AGI at or belowMarried parent with 2024 AGI at or below
    2$45,990N/A
    3$56,880$44,240
    4$70,200$54,600
    5$82,305$64,015
    6$94,410$73,430
    7$106,515$82,845
    8$118,620$92,260
    For an unmarried parent, the AGI threshold is based on 225% of the 2024 federal poverty level, given family size.For married parents, the AGI threshold is based on 175% of the 2024 federal poverty level, given family size.

    2027-28 FAFSA

    2027-28 FAFSA Income Limits
    by marital status and family size for the lower 48 states

    Family sizeunmarried parent with 2024 AGI at or belowMarried parent with 2024 AGI at or below
    2$47,588N/A
    3$59,963$46,638
    4$72,338$56,263
    5$84,713$65,888
    6$97,088$75,313
    7$109,463$85,138
    8$121,838$94,763
    For an unmarried parent, the AGI threshold is based on 225% of the 2025 federal poverty level, given family size.For married parents, the AGI threshold is based on 175% of the 2025 federal poverty level, given family size.

    How FAFSA versus CSS Profile count parent income

    by Paul Martinin Uncategorized

    The rules on what Parent Income is included when calculating your Student Aid Index – or ability to pay for college – differ from FAFSA and CSS Profile.

    FAFSA : a more limited accounting of income

    The FAFSA only takes income from certain lines of a parent’s personal tax return. The personal tax return for FAFSA purposes includes the 1040, Schedule 1, Schedule 3 and Schedule C. For a detailed look at which amounts are included, check out this resource from Federal Student Aid with screenshots from the 2023 tax return. Overall, this limits the total income included.

    CSS Profile : a broader accounting of income

    The CSS Profile uses this same income as a starting point but adds additional untaxed income. What is the untaxed income that the CSS Profile includes? They can vary depending on a parent’s sources of income and form of employment, e.g. working for an employer or self-employed. Here are the most common examples:

    • Pre-tax contributions to an employer retirement account, like a 401k, 403b, or pension.
    • Pre-tax contributions to an HSA.
    • For business owners, certain business deductions are allowed by the IRS but not considered outgoing expenses exclusively for business purposes, like the home office deduction or business expense of a personal car.
    • For property owners, depreciation of the property is allowed by the IRS to offset rental income but is not allowed by CSS Profile for financial aid eligibility.

    In each of these cases, these amounts are added back to the taxable income to calculate the income used in the financial aid evaluation. The result can be a larger amount of income included for evaluating need-based financial aid through the CSS Profile versus the FAFSA.

    Parent Income Included in the FAFSA and CSS Profile

    This table summarizes the income included in each application.

    IncomeFAFSACSS Profile
    Earnings from workYesYes
    Net earnings from investmentsYesYes
    Earnings from businessOnly net earnings reported on the personal tax return after all IRS-allowable deductionsIncludes net earnings reported on the personal tax return and addition of some IRS-allowable deductions
    Earnings from rental propertiesOnly net earnings reported on your personal return after all IRS allowable deductions.Includes net earnings reported on your personal tax return and addition of some IRS-allowable deductions
    Retirement distributionsBoth taxed and untaxed retirement distributions reported on 1040, lines 4a/4b & lines 5a/5bBoth taxed and untaxed retirement distributions reported on 1040, lines 4a/4b & lines 5a/5b
    Social Security benefitsOnly taxed Social Security benefits reported on 1040, line 6bBoth taxed and untaxed Social Security benefits reported on 1040, lines 6a
    UnemploymentYesYes
    Pre-tax contributions to self-employed retirement accounts (SEP, SIMPLE, etc…)Yes, reported on Schedule 1, line 16Yes, reported on Schedule 1, line 16
    Pre-tax contributions to traditional IRAYes, reported on Schedule 1, line 20Yes, reported on Schedule 1, line 20
    Child supportSelf-reported as a Parent Asset for more favorable treatmentYes, self-reported
    Disability paymentsNoYes, self-reported
    Pre-tax contributions to employer retirement accounts (401k, 403b)NoYes, from employer W-2, box 12
    Untaxed alimonyNoYes, self-reported
    Additional business income offset by non-allowed deductionsNoYes, as found on applicable business tax return
    Additional rental income offset by non-allowed deductionsNoYes, as found on Schedule E or applicable return where the property is listed

    How FAFSA versus CSS Profile count parent assets

    by Paul Martinin Uncategorized

    The rules of which Parent Assets are counted in calculating your Student Aid Index – or ability to pay for college – differ from FAFSA and CSS Profile. While there are assets in common, there are exceptions. This chart summarizes which Parent Assets are counted and which are protected.

    Parent Assets Counted and Protected by FAFSA and CSS Profile

    Parent AssetFAFSACSS Profile
    CheckingCountedCounted
    SavingsCountedCounted
    CDs (Certificate of Deposits)CountedCounted
    Brokerage AccountsCountedCounted
    Non-retirement annuitiesCountedCounted
    TrustsCountedCounted
    529 & College Savings PlansOnly Plans owned by parents that benefit the student applicantAll Plans owned by parents, including those that benefit other children
    Equity Value of Second PropertiesCountedCounted
    Equity Value of Primary HomeProtectedVaries by college; see this resource
    Retirement accounts, e.g. 401k, 403b, IRAs, pensions, etc..ProtectedProtected
    Qualified annuitiesProtectedProtected
    Health Savings Accounts (HSAs)ProtectedProtected
    Life InsuranceProtectedProtected
    ABLE AccountsProtectedProtected

    Impact of Parent Assets on the Student Aid Index

    When an asset is counted, the reported amount contributes roughly 5% toward your Student Aid Index. Protected Assets have zero impact on your Student Aid Index. No counted asset is weighted more than another, like a 529 or College Savings Plan. College Savings Plans also contribute 5%.

    Example 1

    Parent assets reported on the FAFSA:

    Assetamount
    Parent Checking Account$2,500
    Parent Savings Account$4,000
    Student 529 Plan owned by Parent$39,000
    Parent Equity in Second Property$150,000
    Total Parent Assets$195,500

    Contribution to SAI from Parent Assets = Total Parent Assets x 5%
    Contribution to SAI from Parent Assets = $195,000 x 5% = $9,775

    Example 2

    Parent assets reported on the FAFSA:

    Assetamount
    Parent Checking Account$4,500
    Parent Savings Account$40,000
    529 Plans for two children owned by Parent$80,000
    Brokerage Account$27,000
    Total Parent Assets$195,500

    Contribution to SAI from Parent Assets = Total Parent Assets x 5%
    Contribution to SAI from Parent Assets = $151,500 x 5% = $7,595

    How business assets count for financial aid

    by Paul Martinin Uncategorized

    Both the FAFSA and CSS Profile require business owners to report the net worth of their business. However, the reported net worth is not counted dollar-for-dollar as a parent asset available for college. Instead, both applications calculate an adjusted net worth for a business before including it as a parent asset. The same applies to farms.

    How to calculate business net worth

    By FAFSA’s guidance, the net worth of a business is calculated by taking tangible assets owned by the business and subtracting debt against those tangible assets. Examples of tangible assets would be:

    • Property owned by the business
    • Vehicle
    • Equipment
    • Value of sellable goods
    • Cash in the business

    More favorable treatment for business assets

    This more favorable treatment means that when an asset is held by a business entity, it has a lesser impact on a student’s aid eligibility. A common example is a rental property. When the rental property is titled to a business instead of directly titled to a parent, the net worth can be reported as a business asset.

    Here’s an example.

    Ownership byNet worthNet worth as parent assetcontribution to student aid index
    Business$350,000$158,000$7,900
    Direct$350,000$350,000$17,500
    Difference-$192,000-$9,600

    Calculation for business assets

    Here is the adjusted net worth calculation for the 2025-26 FAFSA (CSS Profile also follows this calculation). You can enter the net worth of your business to understand what adjusted net worth would be used when calculating parent assets available for college. The financial aid applications will calculate a roughly 5% ability to pay from this adjusted net worth.

    Paths to excluding parent assets from the FAFSA

    by Paul Martinin Uncategorized

    Parent assets reported on the FAFSA impact a student’s aid eligibility. The amount parents are expected to contribute from assets reported can be as high as 5.64% per year, with a rough average of 5%. Given this, the ability to exclude assets from the calculation of the Student Aid Index can be helpful to maximize eligibility.

    These are the three scenarios where a parent is exempt from reporting parent assets.

    1) Student is eligible for the Maximum Pell Grant

    The FAFSA determines whether the student qualifies for the Maximum Pell Grant based on a parent’s Adjusted Gross Income (AGI) in the base year, family size and state of residence. When the parent’s AGI is at or below the threshold based on marital status and family size, the student qualifies for the Maximum Pell Grant. In this case, neither student nor parent assets will be included in the calculation of the Student Aid Index. The student is assigned a Student Aid Index (SAI) equal to $0

      2025-26 FAFSA

      2025-26 FAFSA Income Limits
      by marital status and family size for the lower 48 states

      Family sizeunmarried parent with 2023 AGI at or belowMarried parent with 2023 AGI at or below
      2$44,370N/A
      3$55,935$43,505
      4$67,500$52,500
      5$79,065$61,495
      6$90,630$70,490
      7$102,195$79,485
      8$113,760$88,480
      For an unmarried parent, the AGI threshold is based on 225% of the 2023 federal poverty level, given family size.For married parents, the AGI threshold is based on 175% of the 2023 federal poverty level, given family size.

      2026-27 FAFSA

      2026-27 FAFSA Income Limits
      by marital status and family size for the lower 48 states.

      Family sizeunmarried parent with 2024 AGI at or belowMarried parent with 2024 AGI at or below
      2$45,990N/A
      3$56,880$44,240
      4$70,200$54,600
      5$82,305$64,015
      6$94,410$73,430
      7$106,515$82,845
      8$118,620$92,260
      For an unmarried parent, the AGI threshold is based on 225% of the 2024 federal poverty level, given family size.For married parents, the AGI threshold is based on 175% of the 2024 federal poverty level, given family size.

      2027-28 FAFSA

      2027-28 FAFSA Income Limits
      by marital status and family size for the lower 48 states

      Family sizeunmarried parent with 2024 AGI at or belowMarried parent with 2024 AGI at or below
      2$47,588N/A
      3$59,963$46,638
      4$72,338$56,263
      5$84,713$65,888
      6$97,088$75,313
      7$109,463$85,138
      8$121,838$94,763
      For an unmarried parent, the AGI threshold is based on 225% of the 2025 federal poverty level, given family size.For married parents, the AGI threshold is based on 175% of the 2025 federal poverty level, given family size.

      2) Parent’s income is less than $60,000

      There are two parts to this qualification.

      1. The parent’s combined AGI (Adjusted Gross Income) is less than $60,000.
      2. The parent filing taxes must also meet additional criteria beyond the income threshold, filing what is considered a simplified return. In this case, the parent must not file Schedules A, B, D, E, F, or H or not file a Schedule C with net business income greater than $10,000 of either loss or gain.

      3) Anyone in the student’s family qualified for a means-tested Federal benefit program

      If any member of the student household qualified for a means-tested federal benefit at any time in the two years prior to receiving financial aid, the parent is exempt from reporting assets. For example, the years counted for the 2025-26 FAFSA would be 2023 and 2024.

      The means-tested federal programs included are:

      • Earned income tax credit (EITC)
      • Federal housing assistance
      • Free or reduced-price school lunch
      • Medicaid
      • Refundable credit for coverage under a qualified health plan (QHP)
      • Supplemental Nutrition Assistance Program (SNAP)
      • Supplemental Security Income (SSI)
      • Temporary Assistance for Needy Families (TANF)
      • Special Supplemental Nutrition Program for Women, Infants and Children (WIC)

      Exceptions to these rules

      These rules to exempt Parent Asset reporting do not apply if:

      1. the parent lives outside of the US, even when they file US taxes.
      2. the parent does not file US taxes unless they don’t file because their income is below the filing threshold.

      In both cases above, the parent must still report parent assets.

      How CSS Profile Colleges Count Home Equity

      by Paul Martinin Uncategorized

      Many CSS Profile colleges elect to count your home equity as a parent asset when calculating your ability to pay for college, a.k.a. your Student Aid Index. Though home equity can be a factor, there are big differences in just how much of a factor it will be at a specific college, depending on its institutional financial aid policies.

      When counted, your ability to pay increases by 4 – 5% of the amount of home equity included as a parent asset. Let’s say home equity included were $100,000; that would increase your Student Aid Index – or ability to pay – by $5,000.

      Three approaches to using Home Equity

      1) No Home Equity

      Even though information about your primary home is submitted on the CSS Profile, these colleges do not factor this information in when totaling parent assets available to pay for college. Home equity does not increase your ability to pay nor impact your student’s aid eligibility.

      2) Full Home Equity

      These colleges believe home equity is a key part of your overall net worth. They include 100% of your home equity when totaling parent assets available to pay for college.

      3) Cap Home Equity

      These colleges cap the amount of home equity they count as a parent asset relative to your income. They compare the capped amount of home equity based on your income to your full home equity and use the lesser amount. When the capped amount of home equity is less than your full home equity, they will substitute that amount when counting parent assets. Here are three examples of how this calculation works.

      Example 1: Amherst College

      Policy: Caps home equity at 120% of parent income.
      Parent income = $150,000
      Home Equity (Market Value – Outstanding Mortgage/Debts) = $300,000
      Home Equity Cap as a multiple of parent income (Parent income x 120% cap) = $180,000

      Instead of using $300,000 of home equity, Amherst Financial Aid will substitute $180,000 of home equity when totaling parent assets as part of the net worth available to pay for college.

      Example 2: Swarthmore College

      Policy: Caps home equity at 150% of parent income.
      Parent income = $150,000
      Home Equity (Market Value – Outstanding Mortgage/Debts) = $300,000
      Home Equity Cap as a multiple of parent income (Parent income x 150% cap) = $225,000

      Instead of using $300,000 of home equity, Swarthmore Financial Aid will substitute $225,000 of home equity when totaling parent assets as part of the net worth available to pay for college.

      Example 3: Emory University

      Policy: Caps home equity at 240% of parent income.
      Parent income = $150,000
      Home Equity (Market Value – Outstanding Mortgage/Debts) = $300,000
      Home Equity Cap as a multiple of parent income (Parent income x 240% cap) = $360,000

      In this case, because the capped amount of home equity exceeds the full home equity, Emory Financial Aid will use the $300,000 of home equity when totaling parent assets as part of the net worth available to pay for college.

      Understanding each college’s policy on using home equity

      You can use the information below to get an initial understanding of how CSS Profile colleges will count home equity as a parent asset. Depending on your home equity and a college’s policy, home equity may be a significant swing factor in the institutional financial aid offered by a CSS Profile college.

      Financial aid application process for single, separated or divorced parents

      by Paul Martinin Need-based Financial Aid

      The rules and requirements for single, separated or divorced parents differ depending on the financial aid application. The information below clarifies the rules for both FAFSA (Free Application for Federal Student Aid) and the CSS Profile.

      Rules for 2024-25 FAFSA

      Which parent completes the FAFSA?

      If the student’s parents are 1. Never married, 2. Separated or 3. Divorced, and no longer live in the same household, only one parent – the custodial parent – submits information on the FAFSA. However, if parents are living under the same roof, both parents will be required to submit their information regardless of marital status.

      Who is the custodial parent?

      The criteria FAFSA uses to determine who is the custodial parent are as follows:

      1. The parent who provides the greater financial support to the student in the 12 months prior to application submission.
      2. If the student receives equal support from both parents for that time period, then it’s the parent with the greater income or assets.

      There is no basis for a parent to be the custodial parent for purposes of completing the FAFSA based on the following:

      1. Which parent the student lives with the most.
      2. Which parent has legal custody.
      3. Which parent claims the student on their taxes.

      The custodial parent needs to create a Federal Student Aid (FSA) ID to complete and electronically sign the student’s FAFSA. Watch this short video tutorial on how to create an FSA ID.

      What if the custodial parent is remarried?

      A custodial parent who is remarried reports income and asset information for both themself and their spouse. This is true even if the new spouse has not adopted the student. FAFSA requires the entire household’s financial information for financial aid consideration.

      Rules for CSS Profile

      Which parent completes the CSS Profile?

      Most CSS Profile colleges will require both biological parents to submit their information, even if the parents are 1. Never married, 2. Separated, or 3. Divorced. Both the custodial parent and the noncustodial parent submit their information separately and securely into a single student application that the colleges receive. Information submitted by each biological parent is never shared with the other parent.

      Who is the custodial parent?

      CSS Profile follows the same criteria as FAFSA in determining who the custodial parent is. The custodial parent submits their information in the primary application submitted by the student. This application is completed using the student’s College Board login, so no additional login needs to be created by the custodial parent. In the primary application, the student identifies their other parent and invites that parent to contribute to their CSS Profile application.

      How does the noncustodial parent submit her/his information?

      The noncustodial parent creates a College Board login to submit her/his information. The parent links the information that they are submitting by using the CSS Profile Financial Aid ID, aka “CBFinAid ID,” associated with the student’s primary application. This ensures the information is combined into one application for the college. No access to this information is granted to either the student or non-custodial parent.

      What if either parent is remarried?

      If either parent is remarried, the remarried parent reports financial information for themself and their spouse. This is true even if the new spouse has not adopted the student. The CSS Profile requires the entire household’s financial information.

      What if the noncustodial parent cannot or will not submit the application?

      CSS Profile colleges do not consider a parent’s unwillingness to participate and submit their information as sufficient reason not to collect this information. Non-submission by either parent prevents a college from processing the student’s financial aid application for institutional need-based aid.

      Colleges provide a formal waiver process for a student to petition for the noncustodial parent information to be omitted or waived. The waiver must be submitted separately to each college’s financial aid office, and each college uses its own evaluation process and discretion in granting a waiver.

      The standard waiver request form clearly states circumstances that will and will not be considered for the waiver, often requiring “no contact” with the noncustodial parent. However, each college creates its own criteria for which circumstances to consider. Colleges may also require documentation to support your waiver.

      Excerpt from CSS Profile Waiver Request for the Noncustodial Parent

      You can review the entire standard waiver request form using the link below. Remember to check with your specific college’s financial aid office, as they may have created their own institutional waiver request form.

      Resource center for divorced or separated parents on the CSS Profile website

      The CSS Profile Info for Divorced or Separated Parents resource center includes several resources, including:

      2025-26 FAFSA Student Aid Index (SAI) Calculator

      by Paul Martinin Need-based Financial Aid

      What is the Student Aid Index?

      The 2025-26 FAFSA, or Free Application for Federal Student Aid, is the primary application for need-based financial aid for the 2025-26 academic year. A student and parent/s submit household and financial information. Based on this information, the FAFSA calculates the amount a family can pay for college in a given year, now called the Student Aid Index (SAI).

      A college’s financial aid office uses the Student Aid Index in the simple equation below to determine a student’s eligibility for need-based financial aid given the college’s Cost of Attendance.

      Cost of Attendance – Student Aid Index = Financial Need

      A student’s Financial Need is their eligibility for aid at a college. However, the rules governing Federal Student Aid plus each college’s policies on allocating their institutional need-based funds determine a college’s financial aid offer, which may or may not meet a student’s calculated Financial Need.

      Skip ahead to calculator

      How is the Student Aid Index calculated?

      Family size, parents’ marital status, state of residence, along with four primary financial inputs, determine the 2025-26 Student Aid Index.

      1. Parent 2023 Income
      2. Parent Assets on the filing date
      3. Student 2023 Income
      4. Student Assets on the filing date

      One significant change is the number of students in college will no longer be used in the SAI formula.

      1) Parent Income

      The 2025-26 FAFSA relies on 2023 federal tax returns for all parent income, eliminating the reporting of non-taxed income not included on the federal tax returns. Notably, parents making pre-tax contributions to employer retirement plans will no longer count as part of parent income.

      A first step determines whether a student qualifies for an SAI = $0 and the maximum Pell Grant. If the parent’s Adjusted Gross Income (AGI) is below a multiple of the Federal Poverty Level income for your state and family size, then the student’s SAI = $0. If the parent is not required to file federal tax returns in 2023, then the SAI = -$1,500. This step is incorporated as part of this calculator.

      2) Parent Assets

      The 2025-26 FAFSA will continue to include all assets a parent owns outside of 1) retirement accounts, 2) a primary home, and 3) life insurance policies. The assets counted as Net Worth include checking, savings, CDs, brokerage accounts, 529 or college savings plans only for the student applicant, and equity value of second properties.

      Two additional categories will be counted as parent assets for the calculation of SAI.

      1. Child support received. A parent reports all child support received in the calendar year prior to filing the FAFSA as an asset at the time of application. Child support received was previously reported as non-taxed income.
      2. Net worth of business or farm. The net worth of a business or farm is the value of the business or farm minus any debt against that business or farm. A parent that is only a part owner would report their percentage of the overall net worth.

      2) Student Income

      The 2025-26 FAFSA provides income protection for a student equal to $11,400. In other words, there will be no expected contribution from student income if 2023 income is $11,400 or less. For every dollar over this amount, the contribution rate is 50%. Note, if a student qualifies for SAI = $0 based on their parent’s Adjusted Gross Income, then student income will not factor into the SAI calculation.

      4) Student Assets

      All assets held by a student outside of retirement are reported. These include checking, savings, CDs, and brokerage accounts for most students. 529 or college savings plans owned by the student are always reported as a parent asset. The contribution rate for student assets is 20% of every dollar. Again, if the student qualifies for SAI = $0 based on their parent’s Adjusted Gross Income, then any assets held by the student will not factor into the SAI calculation.

      2025-26 FAFSA Student Aid Index Calculator

      To calculate your Student Aid Index, you can use values from the parent’s and student’s 2023 tax returns and the current value of parent and student assets. Note: This calculator is for dependent students.

      How was this calculator developed?

      This calculator follows the 2025-26 Student Aid Index formula published by the Department of Education in August 2024. You can download the formula sheet here.

      Please consider the following when using this calculator.

      • Student Aid Index formula exempts reporting parent assets if the parent AGI is less than $60,000 AND either
        • Does not file Schedules A, B, C (with a gain or loss greater than $10,000), D, E, F or H.
      • Student Aid Index formula also exempts reporting parent assets if the parent or student receives any means-tested federal benefit, including:
        • Earned income tax credit (EITC)
        • Federal housing assistance
        • Free or reduced-price school lunch
        • Medicaid
        • Refundable credit for coverage under a qualified health plan (QHP)
        • Supplemental Nutrition Assistance Program (SNAP)
        • Supplemental Security Income (SSI)
        • Temporary Assistance for Needy Families (TANF)
        • Special Supplemental Nutrition Program for Women, Infants and Children (WIC)

      5 important changes coming to FAFSA families need to know

      by Paul Martinin Need-based Financial Aid

      Students and parents applying for financial aid will complete a new, simpler FAFSA (Free Application for Federal Student Aid) for the 2024-25 academic year. The new FAFSA greatly reduces the number of questions and makes it easier for students and families to file.

      Student Aid Index (SAI) will replace Expected Family Contribution (EFC) as the calculated amount a family is able to pay for a student’s college for a given year. Colleges will use SAI in place of EFC in the fundamental equation to determine need-based financial aid eligibility.

      Cost of Attendance – Student Aid Index = Financial Need

      Your financial need is the amount of need-based financial aid you would be eligible for.

      Along with the new terminology, there are changes to how a family’s eligibility is calculated. Here are the five most important changes you need to be aware of and how they may impact you.

      1) Elimination of the number of students in college

      Change

      The most discussed – and maligned – change is that the formula no longer divides Student Aid Index (SAI) by the number of students in college. Previously, the Expected Family Contribution (EFC) was calculated as a family’s ability to pay for all college costs for a single academic year. If there were multiple children in college, this EFC was then divided among those children so that each student was expected to pay a portion of the total EFC. Now, the SAI will be calculated equally for each student, except for differences in student income or assets reported between siblings.

      Impact

      Families with multiple children in college at the same time will see an increase in their SAI over previous years’ calculations, reducing their eligibility for financial aid.

      2) Limits on income reported

      Change

      Income reported on the FAFSA will only come from federal tax returns. Parents (or students) will no longer be required to report untaxed or pre-tax income not captured by the tax return. Most notably, pre-tax contributions to employer retirement plans will not be counted. For student income, there is no longer the requirement to report money received or bills paid on their behalf by relatives or others. 

      Impact

      Parents who want to lower their SAI and increase aid eligibility and may now consider maximizing pre-tax employer retirement contributions to reduce the income reported on FAFSA.

      Students can now receive money from relatives – grandparents and others – to help pay for college without that support having a negative impact on their future aid eligibility.

      3) Child support now reported as an asset

      Change

      Child support will no longer be reported as untaxed income, but instead, the amount of child support received in the FAFSA tax year will be reported as a parent asset.

      Impact

      Divorced parents receiving child support may see an increase in their aid eligibility since the contribution rate to the Student Aid Index (SAI) from parent assets is much lower than from parent income.

      4) Value of a family business or farm is reported as a parent asset

      Change

      The net worth of a family business or farm of any size will now be reported as a parent asset. The current EFC formula excludes this amount if the business or farm employs fewer than 100 full-time employees, which exempted most cases. Going forward, this change may impact more small business owners.

      Impact

      Families who report a value to their business or farm will see a higher Student Aid Index and a decrease in their aid eligibility. It’s important to note that the total value reported will not be counted as a parent asset, but only a portion. This 2024-25 chart details how this included amount will be calculated.

      If the net worth of a business or farm is…Then the adjusted net worth is…
      Less than $1$0
      $1 to $165,00040% of net worth of business/farm
      $165,001 to $490,000$66,000 + 50% of net worth over $165,000
      $490,001 to $820,000$228,500 + 60% of net worth over $490,000
      $820,001 or more$426,500 + 100% of net worth over $820,000

      5) New rules to calculate an SAI equal to $0

      Change

      There are new thresholds for students to qualify for an SAI equal to $0 and receive the maximum Pell Grant. A parent’s Adjusted Gross Income (AGI) in the FAFSA tax year will be compared to a multiple of income for Federal Poverty Level for their marital status, family size and state of residence. If the parent’s AGI falls at or below this amount, then a student will be given a maximum SAI equal to $0 and awarded a full Pell Grant. Here is the 2024-25 chart with income thresholds by marital status and family size for the lower 48 states.

      Family size/
      members of household      		Single parent with AGI at or belowMarried parent with AGI at or below
      2$41,198N/A
      3$51,818$40,303
      4$62,438$48,563
      5$73,058$56,823
      6$83,678$65,083
      7$94,298$73,343
      8$104,918$81,603

      SAI can also be as low as -$1,500 as a measure of extreme need. Any student whose parent is not required to file a tax return will be given an SAI equal to -$1,500; however, there are other scenarios where a student’s SAI will be less than $0.

      Impact

      For families with high need, a better opportunity to receive an SAI equal $0 and the maximum Pell Grant. The new methodology is more generous and flexible than today’s “automatic $0 EFC” income threshold of $29,000 or less.

      Guide to creating your FSA ID

      by Paul Martinin Need-based Financial Aid

      Why do you need an FSA ID?

      Your Federal Student Aid ID, or FSA ID, is an identity-verified ID with the Department of Education. An FSA ID is required by each FAFSA contributor to:

      1. Access the online FAFSA,
      2. Provide consent to the IRS to share your Federal Tax Information with the Department of Education,
      3. Electronically sign the FAFSA for submission.

      You’ll use this same FSA ID to reapply for financial aid every year and manage the Federal Student Aid you may receive, such as Direct Federal Student Loans. Once created, your FSA ID will be your forever ID for all things related to the FASFA and Federal Student Aid.

      You can create an FSA ID at: https://studentaid.gov/fsa-id/create-account/launch.

      Who creates an FSA ID?

      For a dependent student applying for financial aid, both the student and parent create their own FSA IDs. If the parent or student already has an FSA ID from prior applications, that FSA ID is used this year and every year.

      Dependent student with married parents

      If the dependent student’s biological or adoptive parents are married, here are the rules for which parents create an FSA ID for the FAFSA.

      Consent to share the “Married filing jointly” tax information is required from only one tax filer. One parent can use their FSA ID to log in, provide that consent, and sign the FAFSA.

      If parents file taxes “Married filing jointly.”
      Only one parent needs to create an FSA ID.

      Consent to share the “Married filing jointly” tax information is required from only one tax filer. One parent can use their FSA ID to log in, provide that consent, and sign the FAFSA.

      Because parents file separate tax returns, consent is required by each parent to share individual tax information. Each parent logs in with their uniquely-identified FSA ID for consent and signature.

      If parents do not file taxes “Married filing jointly.”
      Both parents need to create FSA IDs.

      Because parents file separate tax returns, consent is required by each parent to share individual tax information. Each parent logs in with their uniquely-identified FSA ID for consent and signature.

      Dependent student with separated or divorced parents

      If the dependent student’s biological or adoptive parents are separated or divorced and no longer live together, only the custodial parent is required to complete the FAFSA. However, if the divorced custodial parent is remarried, they must include their spouse on the application. Refer to rules on how to determine who is the custodial parent.

      The custodial parent can use their FSA ID to log in, provide IRS consent, and sign the FAFSA.

      If the custodial parent is not remarried.
      Only the custodial parent needs to create an FSA ID.

      The custodial parent can use their FSA ID to log in, provide IRS consent, and sign the FAFSA.

      Consent to share the “Married filing jointly” tax information is required from only one tax filer. The custodial parent can use their FSA ID to log in, provide IRS consent, and answer all parent questions.

      If the custodial parent is remarried and files taxes “Married filing jointly” with their spouse.
      Only the custodial parent needs to create an FSA ID.

      Consent to share the “Married filing jointly” tax information is required from only one tax filer. The custodial parent can use their FSA ID to log in, provide IRS consent, and answer all parent questions.

      Because the couple files separate tax returns, consent to share individual tax information is required by both filers – the custodial parent and their spouse. This requires each to log in with a uniquely-identified FSA ID for consent and signature.

      If the custodial parent is remarried and does not file taxes “Married filing jointly” with their spouse.
      Both the custodial parent and spouse need to create FSA IDs.

      Because the couple files separate tax returns, consent to share individual tax information is required by both filers – the custodial parent and their spouse. This requires each to log in with a uniquely-identified FSA ID for consent and signature.

      How do you create an FSA ID?

      Go to: https://studentaid.gov/fsa-id/create-account/launch.
      Watch this quick, 5-minute video to create your FSA ID.