Interesting. I expect this means more adjunct jobs at the community colleges and commuting distance state Us.
Maybe I don’t understand how this works, but when I read up on this, it made me think that 5.64% (or whatever the exact number is) of your “unprotected” assets can be included as part of your EFC every year. While the diminishing amount of protected assets is horrifying, it shouldn’t cause a sib’s 529 to be raided (one hopes). At least I don’t think so. . . .
The sib’s 529 only needs to be raided if the parents choose to handle college costs that way.
This is nuts, absolutely nuts. Can anyone explain why this happened? 85% drop in asset protection?? Unbelievable.
Expensive no-merit Private universities are no longer worth it for the middle class.
This only has to do with Pell and other federal student aid. Private schools can do whatever they want.
But some schools give their own need aid based on FAFSA EFC so it’s not accurate to say the decrease in APA only has to do with Pell and other federal student aid.
Those schools can adjust their own aid based on the lower excluded asset amount, for example raising the EFC that is allow from $10000 to $15000 if it wants to. It doesn’t take an act of congress to do it, just an adjustment in the school formula. If state aid is given based on FAFSA, then it might be harder to change.
They can, but many won’t. It particularly hurts students who get special top-up grants based on Pell grant qualification or meeting a certain EFC threshold.
I’d love to get a few congressmen locked in a room to look at what has happened to the EFC over a five year period. It makes no sense.
Seems like something people should be contacting their congressmen about.
So much for encouraging people to save for college. This is all kinds of wrong, IMHO.
Is the EFC cutoff for Pell for 2016-2017 out yet? Curious if it will be increased.
Pell is determined in January. 16-17 will be released in January, 2016.
This is the text from the Dear Colleague letter that contained 15-16 Pell amounts:
The Student Aid and Fiscal Responsibility Act (SAFRA), incorporated as part of Public Law 111-152, provides for an automatic annual increase, based on changes in the Consumer Price Index—through award year 2017-2018—to the appropriated Federal Pell Grant maximum award, resulting in a 2015-2016 maximum award of $5,775. This maximum Pell Grant award for the 2015-2016 Award Year is an increase of $45 from the $5,730 maximum Pell Grant award for the 2014-2015 Award Year. The corresponding maximum Pell Grant eligible expected family contribution (EFC) for 2015-2016 will be 5198.
Section 401(b)(4) of the Higher Education Act (HEA) establishes the minimum Pell Grant award to be ten percent of the maximum award amount for the award year. Thus, for the 2015-2016 Award Year, the statutory minimum Pell Grant scheduled award amount will be $577. However, because we use mid-points in both the EFC columns and the cost of attendance (COA) rows in constructing the schedules, the actual 2015-2016 Award Year minimum scheduled award amount will be $588.
If families have $40k in savings/assets they have to pay an extra $2k/year? That doesn’t sound so bad to me. Even if they also lose a $3k/year state grant at the end of 4 years they still have $20k. If a few thousand dollars a year makes that much of a difference, I think the school was already pushing the limits of affordability.
The FAFSA formula as of 3 years ago already pushed many families past the point of real pain. This has just made it that much harder.
For many lower income families, a $3-5K a year swing between the increase in EFC and loss of state grants means that a student will not be able to afford any of my state’s four-year universities living in the dorms. Not living in the dorms the first year substantially reduces the chances of graduating in four years or six years.
This has a lot of consequences.
While it is true that a family is always better off if they have saved, the penalty a lower income family can face from saving is a problem. It is difficult for families that don’t have a lot of extra money to squirrel away a little here & a little there toward a college fund. College is ridiculously expensive, and grants/loans do not cover the costs. Families have to save if they are going to be able to cover even some of the gap between available aid and costs. If the effect of a relatively small amount of savings is going to wipe away what little aid might be available to them, it’s problematic. The families most affected are those that make too much for Pell but are not that much better off than the Pell-eligible folks. I worked in the aid office at a large urban public U. I saw how many families are in this position … they need encouragement to save, not discouragement. We’re not talking about people that aren’t going to get aid, anyway (which is often who we see crying on CC about how unfair it is that they are penalized because they save … when the penalty is actually because they earn too much).
Not sure how much it matters, though, if those pushing for the simplified FAFSA and one grant-one loan-one campus based program get their way. In that case, the questions will be basically how much did you earn two years ago, how many people are in your household, and how many are in college — no asset questions. Those who earn the least will get the Pell. Everyone will get an unsubsidized loan. FWS will be available for the school to distribute among its student population. And schools will be scrambling to make their own forms so they can try to allocate their own funds in the fairest way possible (which would include evaluating assets, most likely … and how they would do that remains to be seen in the absence of a federal methodology that includes assets). But that is all still just talk.
Agreed. If my two older boys had not gotten $6000 a year in outside scholarship, they would be borrowing that amount. We are moderate income with little in savings, but each child had between 8-9K in 529 money that my parents put in.
I am going to be very, very curious what the FAFSA and CSS Profile will look like for us next spring (middle son’s taking a gap year) as compared to what our financial aid package was this year. (That he obviously didn’t take since he’ll be doing a gap year) With this new formula, I wonder how much we’ll get dinged.
We make a very modest income, live modestly and save fairly relentlessly. We are self employed so our first goal is to save for our retirement. We have saved about 6 months income in case we have an emergency and save for everything we do …Christmas/birthday gifts, vacations, vehicle repairs (and hopefully a future vehicle) etc. and modest amounts in our 2 Ds 529 accounts. It sounds like our frugality and living modestly and paying for what we purchase out of what we have saved is about be penalized. Perhaps we should have fancier cars with a payment, or a larger house or go on vacations we can’t afford to deplete our savings. Sigh…no we’ll keep on doing what we have been doing. D1 is on track to graduate in a couple of years without debt and we would hope that D2 would have that opportunity as well. We will have to see how this affects us next year when we have 2 in college.
You could consider paying off/down your house with the emergency savings and then later take a HELOC when necessary- if you want the 6 months of saved income not considered for FAFSA.
The ‘modest income’ alone might make you unlikely to receive a lot of financial aid from the schools that base it off FAFSA. It might not have an effect at all on generous CSS schools who will probably not reduce their asset allowance.