I’m interested in the updated family size determination for 25-26 which uses 2023 tax info. Our AGI will be close to the Maximum Pell grant level (175% of fed poverty for married couple). But, I’m not sure how they will calculate family size. Is it based on 2023 tax year dependants? Or on family size when filling out the FAFSA? We have an older child that will have graduated college by the time we fill out the FAFSA for 25-26, but will still be a college student and tax dependent for 2023. Whether he counts in the family size or not determines what 175% of AGI level is used.
I’m replying to this thread since I believe the method of determination of family size should be the same for 25-26 as 24-25 (different from past years)
From what I can tell, the reference year is not entirely clear yet (Department of Education hasn’t issued clear guidance). The assumption at this point is that it is changing from the family size expected for the financial aid year for which the FAFSA is being filed to dependents listed on the tax return in the base year (prior-prior tax year, or 2023 for 2025-26). Here is a good synopsis of the changes: https://www.csac.ca.gov/sites/main/files/file-attachments/summary_of_changes_for_the_2024-25_fafasa.pdf. There is a family size chart comparing old & new rules on the document.
I’m actually going to amend this answer. Although the document I linked to is from a financial aid organization, it didn’t really sit well with me. I found a NASFAA document that shows the old & new definitions: https://www.nasfaa.org/uploads/documents/Legislative_Changes_to_Federal_Methodology_Pell_Program_2021.pdf. Bottom of page 8 / top of page 9. I then looked at the actual text of the FAFSA Simplification Act: https://crsreports.congress.gov/product/pdf/R/R46909. Top of page 9 - it says that the Department of Education will establish a procedure for determining family size in cases where using the dependents on the base year tax return has changed or doesn’t accurately reflect the family’s current household size. I have not seen that procedure yet. But based on the available information, it appears that the dependents on the 2023 tax return will be used for household size … as part of the simplification, it will be automatically imported as part of completing the FAFSA.
One thing the family should keep in mind…that college grad might count in the family size in year one for kid two…but what happens in subsequent years??
Hopefully the updated guidance on determination of family size will come out before the 24-25 FAFSA opens up in October. Then I’ll know how it’s determined before the end of 2023 for the 25-26 FAFSA.
It’s frustrating that they don’t finalize all the procedures and rules prior to the beginning of even the end of the applicable tax year. It’s hard to financially plan during the applicable tax year (when you can affect things) when the rules and procedures of how they’re gonna determine something like family size are potentially not finalized until after the applicable tax year is over.
A strict reading of the new regulations shows that the dependents listed on the parent tax return will determine the household size for FAFSA. The regs do say that there needs to be a method to update family size if that is warranted, which I assume means that there will be a way to increase the size if the family has grown (how that will be done is not known). It seems that you will benefit from having the older child on the base year tax return as a dependent.
But … if the family member drops off the parent tax return in future years, aid very well may be reduced as a result.
My older child should be on our tax return for 2023 and 2024. Those tax years apply to 2025-2026 and 2026-2027 FAFSA award years which would be my younger child’s junior and senior years in college.
So, assuming my younger graduates in 4 years without going on to grad school, my older dropping off my tax return as a dependent won’t affect my younger’s financial aid during college.
But, that is with the big IF that the family size is determined by the tax return dependants for the prior prior year. That is the case based on the new rules except for the caveat that regulations need to be set for family size changes since the prior prior year. The lack of specifics on regulations for if the family size changes is what concerns me. Will it be just for additions to the family size since the prior prior year or will it include reductions like mine where an older child is no longer a tax dependent during the award year compared to the prior prior tax year? I’d like to be sure of the answer so I know what income level I need to be under before I do something like contribute to an IRA to reduce my AGI.
Do you know when and where things like the family size changes regulation will be set?
I assume the regulation pretty much has to be in place prior to Oct 1, 2023 for the 2024-2025 FAFSA. And, I wouldn’t expect it to change for the 2025-2026 FAFSA.
Regulations don’t change, but Department of Education policies that guide the implementation of regulations can and do change at any time. But reading the regulations makes me relatively confident that the flexibility will be for adding dependents, rather than removing them. My reasoning is that the purpose of the changes is to make FAFSA simpler. In doing so, the decision was made to use as much information as possible directly from the tax return. It defeats the purpose to then collect additional information in order to remove family members. It does make sense to allow additional family members if the family has grown, though, because it’s in the best interest of the student.
I will add the caveat that this is for federal aid. Schools can’t change the rules for federal aid. However, if they choose to have different policies for awarding their own aid, they can do so.
But it would seem some people will want to add more people to their family size who many not have been on the earlier return. Grandparent moved in, parents took custody of a grandchild, etc.
The FAFSA Simplification Act is the governing document, and it specifies that the the dependents be set as the number on the return. It also says “the FSA will amendments further direct ED to establish procedures for determining family size in cases in which ‘information for the taxable year used in determining the amount of need of the student for financial assistance under this title has changed or does not accurately reflect the applicant’s current household size.’”
For sure, this means that there needs to be a procedure to allow for the adjustment in family size if there are additional family members, as this is in the best interest of the student. It could be that there are fewer dependents, which might possibly reduce need.
I admit that I am making assumptions when I say that I would be surprised if the “procedures” to be developed would adjust downward … but it defeats the purpose of moving from self reporting to using the number of dependents transferred from the tax return if they are going to end up asking everyone if the number of dependents is still correct for the aid year. It could happen, but it seems counterintuitive to the desire to simplify FAFSA. Again, though, it could happen.
If a student has taxable grants and/or scholarships that are included in the student’s AGI, it seems that they could possibly (when added to the parent’s AGI) push the total over the threshold for determining an automatic 0 SAI based solely on AGI and family size. The grant and scholarships would be subtracted when going through the Adjusted Available Income calculations to determine the SAI, but it seems like the “simplification” aspect would be compromised. Looking at the draft eligibility and SAI calculation guide, it looks like it may result in a negative SAI in my situation, but that may not always be the case. Is my reasoning correct?
There is still an offset for student’s taxable grants and scholarships, according to the draft formula guide. I assume this will be self reported, as it has been in the past. In terms of qualifying for automatic zero SAI, I don’t see any guidance saying that the determination of family income includes the student income. It never has, so it isn’t a problem if the student has taxable grants / scholarships in their AGI for this purpose. For negative SAI, the formula is used, so the taxable portion of grants / scholarships will be removed from income prior to determining SAI.
FSA confirming 2024-25 FAFSA will not be available until December of this year.
Impacts include the fact that financial aid offers won’t be available when ED decisions come out in mid December. This may cause more ED admitted students to back out of the agreement, who knows.
Delayed financial aid packages will also impact rolling and EA applications. May also lead to more apps as some students will be looking at Jan 1 deadlines before they have financial aid offers from ED, rolling, and/or EA decisions. I don’t know how Wake Forest will be able to do rolling ED this year to take another example.
Obviously we all want FAFSA to launch in working order, but the December launch will have some consequences.
Will also make some students put in additional apps in case the ED FA offer is inadequate. I wonder what proportion of ED applicants typically apply for FA?
It would be good for schools to push back the RD deadlines next cycle because of this but some just can’t do that because of the app volume they receive.
Wow! My D22 mostly applied to schools that used the CSS profile, but she also applied to a bunch of external scholarships sponsored by organizations that use the FAFSA EFC and/or Pell grant status to distinguish who is eligible to apply --I wonder if those scholarship processes will be delayed as well.
I expect that many things will be delayed for that particular year. Keep in mind, though, that until very recently, the FAFSA was not available until January 1st. It’s not like the later date is a new & novel thing. It’s also important to remember that it is a one-time issue related to numerous and challenging changes to the processing environment. It’s going to be a difficult transitional year for schools, but I think that the release date will have less impact than the effect of the changes to the FAFSA formula.
yeah; our #2 kid was able to take out subsidized loans the 3 yrs she was in college when her brothers were too. That was a help to our family and her with the EFC being split from that FAFSA formula. Not sure how that will go now; could be much harder to get those subsidized loans.