Financial Aid Changes from CAA Legislation Extends into 2023
By A. Scott White, CFP®, ChFC®, CLU®
President, Scott White Advisors
Though now the worst of it remains in the rearview mirror, the Covid-19 pandemic was a period of great change, physically, emotionally – and fiscally. Those very changes still ripple into our lives in 2023, nearly three years later. In December of 2020, for example, the Consolidated Appropriations Act, 2021(CAA) was passed, yet its impacts can still be felt.
What Is the CAA?
Initially designed to be an emergency relief mechanism responding to the Covid-19 pandemic, the CAA has farther-reaching effects extending to 2023. An expansive act, the CAA includes provisions for a variety of departments and areas of living, with many changes set to continue through 2023. Not least among these are the financial aid provisions, which includes a higher education emergency relief fund meant to support colleges and universities as they navigate the pandemic and post-pandemic world.
The CAA allocates about $22.7 billion to institutions of higher education, 89 percent of which is specifically reserved “to prevent, prepare for, and respond to coronavirus.” Part of the provisions of the act encourage and, in some cases, require institutions to use funds to aid students financially. Students in college or entering college during that time benefitted from the extra funds put toward grants to help cover cost of attendance as well as emergency Covid-19 costs – benefits that extend past 2021.
The FAFSA Simplification Act
Another change provided for in the CAA is one taking effect in the 2023-24 Free Application for Federal Student Aid (FAFSA) form, which opened October 1, 2022. Entitled the FAFSA Simplification Act, this smaller bill within the CAA aims to do just that: ease the process of filling out the FAFSA form. Restructured and updated, the form will ideally lead to easier access as well as increased fairness. Some of the new changes to the form include:
- Fewer questions. Eliminating questions about drug convictions and getting information from higher education institutions when possible, reduces the length of the form.
- Changes to cost of attendance. This includes separating the previously singular charge of “room and board” to two separate balances.
- Expanded income protection allowance. This will generally benefit students and parents, sheltering portions of income from the FAFSA.
- Changes to untaxed income and benefits. Several types of “untaxed income and benefits” will now either be omitted or relabeled as “assets”. As well, “income” will not include a federal work-study job, the American Opportunity tax credit, or the Lifetime Learning credit.
- Multiple children in college at the same time loses preferential treatment.
- Expanded Pell Grant. These changes will allow a greater number of students to be eligible for a Pell Grant.
- Updated terminology. The Expected Family Contribution, or EFC, is now called the Student Aid Index, or SAI.
Now open in its new, simplified state, the 2023-24 FAFSA is a financial aid change affecting allocation of financial aid funds. Clearly, the CAA has had long-lasting effects and will continue to. From simplifying the FAFSA to financial aid provisions for higher education institutions, new legislation can have resounding effects for families with students in college or about to enter college.