Moving Forward on FAFSA Simplification

The U.S. Education Department is moving forward to carry out some parts of the FAFSA Simplification Act before unveiling a simplified Free Application for Federal Student Aid next fall.

For colleges and universities, that means updating how the total cost of attendance is calculated—a key measure used to add up financial aid offers. Guidance released this week provides institutions with details on how to calculate a new cost-of-attendance figure, which will be used to calculate financial aid awards for the 2023–24 academic year.

Cost of attendance currently includes tuition and fees, room and board, and other expenses, though the new law changed definitions of the different components used in the calculation and added new requirements to include more money for housing and food, among other changes.

Karen McCarthy, vice president for public policy and federal relations of the National Association of Student Financial Aid Administrators, said the timing of the change and release of guidance could disrupt when students receive their financial aid offers.

“The cost-of-attendance changes are so significant because of the timing, and the schools are already working on their budgets for next year now. It’s a long process at most institutions,” McCarthy said. “The second thing is that the cost of attendance is so crucial in the whole financial aid offer picture. So, schools cannot really send out accurate finalized financial aid offers until the cost of attendance is all settled.”

NASFAA and other organizations have sounded the alarm about the pace of the department’s implementation of the FAFSA Simplification Act, citing the need for guidance and time for institutions to make the necessary changes. NASFAA, in particular, has sent a host of questions to the department about the simplification process and the plan for the next two years.

The department, with Congress’s approval, delayed the full implementation of the FAFSA Simplification Act in 2021 to the 2024–25 academic year. However, Congress gave the department the discretion to carry out some provisions sooner as part of a phased implementation.

In guidance released this week, the department said cost of attendance should include the higher allowances for food and housing and transportation expenses; loan fees for nonfederal student loans can’t be included in the calculation. The cost of food should reflect a three-meals-a-day campus meal plan, but institutions also should provide an allowance for buying food off campus for students who don’t purchase a campus plan.

Housing expenses for students living in institutionally owned or operated residence must be based on either the average or median cost charged to residents, whichever is greater, according to the guidance. The housing figure for those living off campus must include rent or other housing costs.

All websites referencing cost of attendance have to be updated for the 2023–24 academic year as well.

“FSA declines to clarify where and how institutions must meet this requirement other than to note that institutions should be able to document a ‘reasonable approach’ to complying with this requirement,” NASFAA staff wrote in a policy update on the new guidance.

McCarthy said the new guidance didn’t answer all the association’s questions.

“I would say that the guidance in the Dear Colleague letter is pretty high level and is not super prescriptive,” McCarthy said. “They are pretty closely adhering to the language that is in the law itself and not providing a lot of prescriptive guidance beyond what’s in the law.”

NASFAA had sought clarity about how to calculate transportation costs, when institutions should set the median amount of housing and ways to develop a living expense allowance for students who live at home that’s greater than zero. The department said in response to the association’s questions that institutions have broad discretion in developing reasonable costs for the different elements included in the cost of attendance.

For this part of the FAFSA Simplification Act, Congress gave the department the authority to go through the negotiated rule-making process for cost of attendance, so further changes to the metric could be enacted that way.

“Schools are all over this guidance to try to make sure that they can get it incorporated,” McCarthy said. “Some schools will have bigger changes to make to their cost of attendance than others … They will need to make sure that their COAs are in compliance with this before they start sending offers.”

The new law requires that colleges and universities develop policies and processes for reviewing financial aid elements, such as the expected family contribution, which is a measure of how much a family can pay toward their child’s education. Colleges and universities also are required to publicly disclose that students can seek an adjustment to their financial aid package based on special and unusual circumstances.

Financial aid administrators at institutions have greater flexibility under the new law to adjust the dependency status on a student’s FAFSA for those who have unusual circumstances, such as those who are homeless or in foster care. Students who receive a determination of independence, which confirms they are either homeless or unaccompanied, won’t have to get a new determination each award year, according to the guidance.

The determination process has been a barrier for homeless and foster youth, and determinations of unaccompanied homeless youth dropped by about 10 percent in the 2020–21 academic year—the first decline in the last five years, according to a recent report from SchoolHouse Connection.

The next step in FAFSA simplification that McCarthy and others are awaiting is the new formula that the department will use to calculate a student’s financial aid eligibility.