Why the New Student Aid Formula Spells Trouble for Families

Many Americans are aware of the Biden administration’s battle for student loan forgiveness. But a major policy decision that has flown under the radar is a change to the way federal student aid will be distributed among students. Stuffed into those end-of-the-year pork-filled bills is a provision that spells trouble for families.

In 2020, Congress passed the Consolidated Appropriations Act, 2021, which includes the FAFSA Simplification Act. One of the provisions of the FAFSA Simplification Act will replace the Expected Family Contribution (EFC) metric with the Student Aid Index (SAI) in the 2024–2025 award year. 

The EFC uses income and asset information from the FAFSA form to determine how much a family can reasonably pay for college. Need-based federal aid is calculated by subtracting the EFC from the total cost of attendance for one year. Critics of the EFC claimed the metric misled families regarding the actual cost of college. The primary complaint was that it excluded other costs families might owe, like student loans (which were lumped in with the federal aid category). 

But it is hard to believe that this is the justification for eliminating the EFC altogether. The change goes further than presenting the information differently. It totally revamps the formula for computing family contributions in a way that penalizes larger families and sneaks in a small stipend for low-income students.

The SAI disregards family size when determining how much a family should receive in federal student aid. Families with multiple children enrolled in college at the same time will receive much less aid than they would have in the former plan. Declining birth rates in the U.S. already present major problems down the road. The SAI formula becomes another policy that makes it a burden to have children.

[Related: “Biden Plans to Turn Student Loans into Delayed Grants”]

The new formula also gives students an automatic stipend just for being at college as long as they are poor. The formula allows for a -$1,500 score, which essentially gives low-income students extra funds that could cover expenses besides those calculated by the college. Free money is a powerful incentive to get students to consider attending college. But providing such benefits, without considering if students are academically prepared, could actually prove harmful to these very students. 

Low-income students are nine times more likely to have a high school GPA below 2.5. Common sense tells us that these students are more likely to enter college with an academic disadvantage. Money does not fix shortcomings that should have been taken care of during K–12 education. Without tying aid distribution to academic merit, the government is more likely to encourage academically unprepared students to attend college. And it’s these students who struggle to finish, making their time and financial investments worthless. This doesn’t mean low-income students should be prohibited from college attendance or from receiving federal aid. A better approach would consider academic qualifications when distributing federal aid. As a result, academically qualified low-income students would have the opportunity to attend college. Those who are not qualified would be protected from wasting time and money. 

The SAI keeps the higher education industrial complex afloat. These changes, if anything, prevent us from seriously considering alternatives to college degrees and dismantling the idea that every person benefits from a college education. This is good for universities struggling with declining enrollment—not so for students and families in the long term.

Image: Adobe Stock


  • Neetu Arnold

    Neetu Arnold is a senior research associate at the National Association of Scholars. Follow her on Twitter @neetu_arnold.

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5 thoughts on “Why the New Student Aid Formula Spells Trouble for Families

  1. Students who are not qualified to attend college should not attend. There is a difference between being unqualified and not being the best. The author’s wording implies a dichotomy, with inadequate concern for students who struggle but seek educations and can achieve much with some assistance; we should preserve their access to aid.

    1. I agree, and made a similar point below. Especially about students who can succeed with proper help. Part of it is just knowing what to do to get academic help. Some education in personal finance would also help enormously. I think a lot of the DEI stuff would be far more helpful (not to say less damaging) if it proceeded from the attitude of helping people (of all races) make up ground, if they need it. I see how the students from upper middle class and professional families know so much about making their way in the world, that many of the struggling groups (again, of all races) just don’t know. If one can get them going, sometimes they do just as well.

  2. The K-12 public education is flawed for low-income students due to systemic inequities in funding and more. Although free money does not solve this problem, saying that low-income prospective students do not deserve it because they may not be academically prepared worsens the problem in empowering them through higher education. Students can also vastly change their academic habits while in college. While more can be done to improve the situation low-income students face in terms of education, this is still a good step forward. I agree with the family size problem being problematic though.

  3. “As a result, academically qualified low-income students would have the opportunity to attend college. Those who are not qualified would be protected from wasting time and money.”

    If only it were that simple. “academically qualified and not qualified” is not a binary. There’s a huge gray area. And it involves more than one variable. A person can be academically qualified and lacking in drive, study habits, mental health, or simply money. One can estimate odds of success, but that’s all. And then there is the question of what is success. A 4.0 average? Scraping by with a C average?

    And sometimes a student can start from behind and by dint of determination and undeveloped talent, succeed where one might not have predicted it. I’ve seen it and it can be very inspiring.

    I’ve never understood where the idea of “college for all” supposedly comes from. If it means a 4-year degree for everyone, I don’t think I know one professor who subscribes to this.

    I don’t know if the new aid formula is better or worse. Certainly, FAFSA has generated a lot of criticism, for its supposed absurd complexity among other things. I certainly don’t count on the federal government to make things better. Very few things are done well in this country these days.

  4. There is a larger issue here as the Students for Fair Admissions cases will inevitably drive an ash stake through the heart of Affirmative Retribution. — raising the question of Affirmative Retribution-based financial aid.

    There’s a lot of that, much of it hidden, and it will be interesting to see how it all shakes out. It’s families with multiple children who are the most strapped now — and the change mentioned above, along with the Affirmative Retribution largess — could wind up excluding a lot more White students than quotas ever could…

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