In December 2020, the Future Act and the FAFSA Simplification Act were signed into law. These acts allow the IRS to share data with the Federal Student Aid office and significantly reduce the number of questions that students and parents need to fill out on the FAFSA form. One of the primary changes instituted is replacing Expected Family Income (EFC) to the Student Aid Index (SAI) as a factor in determining student need-based aid eligibility.

This change from EFC to SAI could impact a college or university’s overall scholarship awarding strategy. Some first-generation or financially underserved students may receive different amounts of federal and state need-based aid than they had expected. Universities need support to make the change from using EFC to using SAI in their student enrollment and financial aid awarding strategy.

This shift in how need-based aid is calculated may also affect the demographics of a university’s student body. Students who previously may not have qualified for need-based aid under EFC calculations may qualify under SAI, potentially increasing diversity and inclusion on college campuses.

But universities must be prepared to make adjustments to their scholarship awarding strategy to ensure they are providing aid to the students who need it most. There will not be a simple 1-to-1 crosswalk between EFC and SAI levels, meaning the overall strategy needs to be revised based on this new index. This may involve revisiting their criteria for awarding need-based institutional aid and supplemental strategic awards.

Overall, the FAFSA Simplification Act has the potential to significantly change the landscape of higher education enrollment and financial aid awarding. Universities need to stay informed and adapt their strategies accordingly.

Some key strategies the SightLine team recommends are to:

• Use a student-level enrollment model to identify individual students who may be less likely to enroll due to financial factors.
• Simulate likely enrollment outcomes for the entire applicant pool based on new SAI data and other predictive variables.
• Compare the distributions of need-based aid and total out-of-pocket costs, dependent on parent income brackets, as compared to previous years. These distributions should be similar year over year, despite the change from EFC to SAI.
• Simulate and test any changes you may be considered for merit-based aid before you publish changes online. Changes to both need-based aid qualifications and merit-based aid brackets simultaneously may create unintended consequences that should be tested.
• Collaborate with other universities and higher education institutions to gather data and strategize on how best to handle the transition from EFC to SAI.
• Seek out additional resources from federal and state governments.

The FAFSA Simplification Act has the potential to greatly impact a university’s scholarship awarding strategy. It is important for universities to stay informed and adapt their strategies in order to continue providing fair and equitable aid opportunities for all students. Connect with SightLine for help navigating this transition and creating a successful scholarship awarding plan.