NAICU Washington Update

Congress is Looking at Redesigning the Federal Student Aid Formula

December 04, 2020

After many years of failed attempts, Senator Lamar Alexander (R-TN) is making a last-ditch attempt to pass his student aid simplification bill, the FAFSA Simplification Act before he retires in early January.  This time, however, it seems that Democrats in both the House of Representatives and the Senate may be lending a sympathetic ear.  

The passage of the FAFSA Simplification Act would redo the system that determines eligibility for federal financial aid and attempt to simplify the Free Application for Federal Student Aid (FAFSA). As such, this bill is likely to determine how more than a trillion dollars in federal student aid is allotted over the next decade.

Due to these, and other concerns highlighted below, NAICU is strongly urging its members to discuss this bill with your financial aid office and assess how it might affect aid on your campus.  Once you’ve made an assessment, please send us an email at to let us know if you think the bill will have a positive or negative impact on affordability for your students.  The National Association of Student Financial Aid Administrators (NASFAA) has endorsed the bill, but none of the presidential associations for any sector of higher education, including NAICU, have followed suit because of concerns over the potential impact on students.

Such a bill could bring many improvements, however, there are also many risks in the plan, including the speed at which the formula could be amended.  While it is clear that Sen. Alexander’s bill will be changed as it is negotiated with House and Senate Democrats, it is not clear what those changes will be.  

Based on past proposals, it is likely all parties will agree to expand eligibility for student aid for independent students and for families headed by single parents, making it easier for them to qualify for a full Pell Grant award at higher income levels. (No need analysis bill can raise the Pell Grant maximum for the poorest students who already receive a full Pell Grant award; such an increase can only happen when appropriators raise the Pell Grant maximum in the funding process).  

However, there are other aspects of the bill that could be problematic.  High among the concerns is that the bill is likely to remove consideration of the extra college expenses faced by families with multiple children in college at the same time. Under current rules, if a family is expected to contribute $5,000 toward their children’s education in a given year, and they have two children in college, then the total contribution for that family would be divided between the children; $2,500 for each.  If the “numbers in college” rule is removed, then the same family would be expected to contribute $5,000 for each child.  This could greatly impact the aid packages available to these families. 

In addition, while the bill is likely to substantially raise the income protection allowances for families where either one or both parents are in college and they have children in the home, it is less clear if it will raise the income protection allowance for two-parent families in which the child or children are the students.  Income protection allowances are the amount of earnings a family is considered to have available to support their basic needs, such as food, housing, and clothing.  Such a move would raise equity issues among various types of families.

While this bill is highly technical, and on a fast track that may not be altered, we want to make sure you were in communication with your financial aid office on these potential developments and to ask you to send us your feedback so we can determine how best to advocate on behalf of private, nonprofit colleges and universities.

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