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How the FAFSA Simplification Can Impact Your Financial Aid
The FAFSA may be simpler, but the amount of aid you qualify for could change
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Updated · 2 min read
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NerdWallet's content is fact-checked for accuracy, timeliness and relevance. It undergoes a thorough review process involving writers and editors to ensure the information is as clear and complete as possible.
Trea S. Branch is a former NerdWallet writer focused on student loan refinancing. She holds a degree in economics from the University of Michigan and a degree in business from the University of Notre Dame. Trea shared her own student loan payoff journey through a blog, which turned into a personal finance coaching business. Her goal has been to empower anyone overwhelmed by student debt.
Karen Gaudette Brewer leads the Core Personal Finance team at NerdWallet. Previously, she guided students and their families through the ins and outs of paying for college and managing student debt on the Higher Education team. Helping people navigate complex money decisions and feel more confident brings her great joy: as the daughter of an immigrant, from an early age she was the translator of financial documents and the person who called the credit card company to fix fraud.
She joined NerdWallet with 20 years of experience working in newsrooms and leading editorial teams, most recently as executive editor of HealthCentral. She launched her journalism career with The Associated Press and later worked for The (Riverside) Press-Enterprise, The Seattle Times, PCC Community Markets and Allrecipes.com.
She is a graduate of the 2022 Poynter Institute Leadership Academy for Women in Media. Her writing has been honored by the Society for Features Journalism and the Society of Professional Journalists. In addition, she’s the author of two books about the Pacific Northwest.
Head of Content, Core Personal Finance
🤓Nerdy Tip
When can I submit my FAFSA application? The FAFSA for the 2025-26 academic year is now open for all students. FAFSA applications for the current academic year, 2024-25, can be submitted until June 30, 2025.
For the first time in 40 years, students are seeing a completely revamped Free Application for Federal Student Aid (FAFSA). These changes are part of the FAFSA Simplification Act and should benefit most families, but some households could see their eligible aid decrease significantly.
The FAFSA Simplification Act aims to streamline the application process, remove barriers for key student populations and expand federal aid eligibility. Notable changes to the FAFSA include:
Replacing the Expected Family Contribution with the Student Aid Index.
Expanding Federal Pell Grant eligibility.
Automatically populating federal income tax data from the IRS.
Adding details that determine a school's cost of attendance.
Removing questions about Selective Service and drug convictions.
Simplifying questions that determine the independent status of students in unusual circumstances, such as homeless students, orphans or former foster youth. Institutions will have more flexibility in adjusting certain factors that impact federal student aid for these students.
Translating the application so it will be available in more languages.
The long-awaited changes soft-launched in late December and are still rolling out as the Department of Education works through technical glitches and some errors, including fixing math that could have cost students $1.8 billion in federal aid and fixing the process for students whose parents don't have Social Security Numbers to submit the FAFSA.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
3.19-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. (2)As certified by your school and less any other financial aid you might receive. Minimum $1,000. (3)This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 6/30/2025. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
Variable APR
4.24-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. (2)As certified by your school and less any other financial aid you might receive. Minimum $1,000. (3)This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 6/30/2025. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
3.19-16.99%
Lowest rates shown include the auto debit discount. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 6/23/2025. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
Variable APR
4.37-16.49%
Lowest rates shown include the auto debit discount. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 6/23/2025. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
The Department of Education is changing how a family's need-based aid is calculated. As a result, more households could receive more aid.
Before FAFSA simplification: A family's need was calculated using the Expected Family Contribution (EFC). The EFC incorporated income and assets, family size and the number of children currently enrolled in college. Typically, the lower the EFC, the more aid you'd be eligible for.
After the FAFSA simplification: The EFC is being replaced by the Student Aid Index (SAI). And similar to the EFC, the lower the SAI, the more aid you’ll be eligible for. But the new formula increases the income protection allowance — allowing for more of a student's or family's income to be excluded from the calculation.
For example, using the EFC, the parent income protection allowance for a family of four for the 2023-24 academic year is $32,610. For the 2024-25 school year, the same family can exclude $35,870 — protecting an additional $3,260 from their income calculation and lowering the student's SAI.
Moving away from the EFC to the SAI, it will be easier for some households to show the magnitude of their financial need.
Before FAFSA simplification: Students from a household with limited income and assets could, at the lowest limit, receive an EFC of zero. If your EFC was zero, you were automatically eligible for the maximum amount of federal student aid.
How it works:
Cost of attendance - EFC = Financial need
For example, if your school's cost of attendance is $20,000 and your EFC is zero, you would be eligible for $20,000 in need-based aid.
After FAFSA simplification: Unlike the EFC, the new SAI calculation can drop below zero. The SAI can be as low as -1,500. A family with significantly fewer financial resources could receive more aid in the 2024-25 academic year than they were eligible to receive in the 2023-24 school year.
How it works:
Cost of attendance - SAI = Financial need
Using the example above, having a $20,000 cost of attendance and an SAI of -1,500, you could be eligible for $21,500 in need-based aid — an increase of $1,500.
The SAI calculation also makes it easier to qualify for the Pell Grant:
If your SAI is between 0 and -1,500, you qualify for the maximum Pell Grant.
If your SAI is greater than 0 but less than the maximum Pell Grant award ($7,395), you could qualify for the maximum Pell Grant — minus your SAI.
If your SAI is greater than the maximum Pell Grant award, you could still qualify for a Pell Grant depending on your family size, adjusted gross income and poverty guidelines.
Changes that will impact students with siblings in college
Families with more than one child in college at the same time will no longer receive a sibling discount.
Before FAFSA simplification: The contribution for parents with multiple children in college was divided by the number of children enrolled. This was based on the idea that a parent's ability to pay for college doesn't increase as they have more children enrolled, according to the Department of Education.
Using an example from the Department of Education, a parent with one dependent in college full time could have an EFC of $10,000. When their second child enrolls, that child's EFC would be $5,000. If they have three children enrolled, the third child would have an EFC of $3,333, and so on.
After FAFSA simplification: The SAI does not consider the number of children enrolled in college when determining the parent's contribution.
For some families, particularly those with incomes and assets between $75,000 and $200,000, the impact of removing the sibling discount could be large. Their eligibility for financial aid could be cut by thousands of dollars, explained Phillip Levine, an economics professor at Wellesley College.
All changes to the FAFSA should be in place for the 2024-25 academic year, but you don't have to wait to take action. Use the federal student aid estimator to see what you'll be eligible to receive.
